Business insurance for LLCs
Once you’ve registered as a limited liability company (LLC), your personal assets are protected against the risks of running a business. The next step is to make sure you have the right insurance coverage for your tech company.
What are the advantages of an LLC?
Before you even start your tech company, one of the first questions you might have is how to structure your business. It's critical to know the difference between sole proprietorships and LLCs.
A sole proprietor is someone who owns a business and is personally responsible for its profits, debts, and liabilities. With a sole proprietorship, your company:
- Does not need to register with your state
- Is responsible for lawsuits or business obligations
- Is not separated from your personal assets, meaning creditors can come after your personal belongings if your business assets cannot cover your debts
- Will disappear if you pass away or you decide to sell the company
LLCs are a more formal corporate structure for your company. With this setup, your IT company:
- Needs to file for a business classification in your state, which could cost between $50 and $500
- Has separate assets from your personal assets
- Could be viewed as less risky to lenders
- Could accept additional owners of the company
- Can continue running under an operating agreement if you pass away or separate from the company
What is the best insurance for an LLC business?
Once you’ve decided to register your tech company as an LLC, make sure your commercial insurance meets your needs. All small business owners should check the insurance requirements in their state.
Beyond those required policies, IT LLC businesses need coverage tailored to the risks their industry faces. If you're not sure which policies are right for you, we've got you covered:
Errors and omissions insurance (E&O)
If your LLC tech company offers expert advice to clients or services essential to your client's profits, you'll probably need errors and omissions (E&O) insurance. Some client contract will require you carry this policy.
E&O gives small businesses protection from clients who sue over a mistake or oversight by covering the cost of legal defense, court-ordered judgments, and settlements.
Cyber liability insurance
This policy covers the costs associated with cyberattacks and data breaches. It typically comes in two forms:
First-party cyber liability insurance helps your tech company recover from a data breach or cyberattack. It covers expenses like the cost of credit monitoring services, crisis management, and cybersecurity incident investigations.
Thirty-party cyber liability insurance protects tech companies if a client sues you for failing to prevent a data breach or cyberattack at their business. If you find yourself in this kind of dispute, this covers your attorney's fees, settlement, court-ordered judgments, and other legal costs.
Fidelity bonds protect your LLC if a client or customer accuses one of your employees of theft. It directly compensates the client for the amount that was stolen.
Even if your employees are trustworthy, this policy reassures clients that there is little risk in working with your company. Some clients may request a fidelity bond in the terms of a contract.
Business owner’s policy (BOP)
A business owner’s policy combines two policies at a discount:
General liability insurance is one of the most common policies that small business owners need. It covers various common risks, including third-party (non-employee) bodily injury and property damage. The policy is especially beneficial for tech LLCs that invite the public into an office or storefront, handle delicate client equipment, or have an active social media presence.
Commercial property insurance is critical for protecting your work equipment and your building if you own it. This policy is valuable even if you’re renting an office space since your landlord’s policy won’t cover your company’s belongings.
Small low-risk tech companies are typically eligible for a business owner’s policy.
Workers’ compensation insurance
How much does business insurance for LLCs cost?
Buying small business insurance for your tech LLC is a small investment when you consider how much a lawsuit or physical property damage could cost. Here are the median premiums for our top recommended policies:
Errors and omissions insurance costs: $61 per month
Cyber liability insurance costs: $145 per month
Business owner’s policy costs: $45 per month
Workers' compensation insurance costs: $36 per month
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