There are several parts to this question.
My brother and I both have a construction company. We would like tostart another one together. so…
1. Is it possible to use the liability insurance we both have in place for each of us to cover the new company without getting another policy?
2. If so, would this affiliate both his and my company by the conection to the new company?
3. Is this wise or just asking for trouble?
Replies
The policy you have in place (assuming it covers the activity you plan to do) covers the named insured.
If you start a new "company" that is actually a separate legal entity (S Corp. or LLC), then the new company is not a named insured and the existing policy won't cover the company. If the new company has assets, that can be a problem.
If your existing company is a separate legal entity, the work you do outside of that company is not insured (your existing company is named insured, not you, unless you are also listed as a named insured on the policy). So you could be working naked under the new company.
An insurance policy doesn't affiliate companys.
Net, net -- talk to your insurance agent. If what you have are really three separate legal entities, you'll need to either amend one or both policies to add the new company as a named insured, or get it its own policy.
"A job well done is its own reward. Now would you prefer to make the final payment by cash, check or Master Card?"
What we're trying to do is to make the new company an affiliate of both companies without merging the old companies. If that makes any sense. As far as the insurance goes, we're just trying to save the extra money.
We both have the same insurance company (there is only one in my town that does liability insurance) and have asked as of monday and she still doesnt have an answer.
Another reason is we have to bid a time sensitive contract and it takes 4 to 6 weeks to get a new company insured.
Makes perfect sense. The two parent companies will own the stock of the affiliate.
One thing you could consider is forming a partnership or joint venture of the two existing companies rather than a new company. Can't guarantee this would work in your state and under your policies though, so instead of talking to your ins. agent you'd have to talk to your lawyer about that approach.
It's pretty common though to have large construction outfits form joint ventures for the purpose of a single large project.
"A job well done is its own reward. Now would you prefer to make the final payment by cash, check or Master Card?"
If your existing companies are going to be subs to the new company, you only need a base plan for liability, since your old companies will give certificates of insurance, your exposure will be zero, the policy for this is minimal.
>>"If your existing companies are going to be subs to the new company, you only need a base plan for liability, since your old companies will give certificates of insurance, your exposure will be zero, the policy for this is minimal.
Yeah, IF that's the case then technically you are right. But exposure is not zero. Still have defense costs.
"A job well done is its own reward. Now would you prefer to make the final payment by cash, check or Master Card?"
I'm not familiar with the term Defense Costs......In Mass, the term exposure just means the amount of your 1099 plus your w-2 reported expenses that are not exempted with a certificate of insurance.
However, if they incorporate, any paycheck that they recieve will become an exposure if it is Paid through the new business.
Oh, I get what you're saying now.
I'm talking about getting sued. Exposure to liability and paying the lawyers to defend you. Defense costs.
"A job well done is its own reward. Now would you prefer to make the final payment by cash, check or Master Card?"
Sorry it took so long to get back to you, I've been out of town. I really dont want to merge with my brother because I have been in business a lot longer and have a better rep. His company name is Renegade construction. Not the kind of name that instills great quality or service.
btw, my agent called back and said it would not be possible to work it the way we would like, so, I guess we just have to cough up the money. She dis say that it would only take about ten days though.
Thank you and every one else for your advice.
Ask your lawyer.
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