Opening my own shop.
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I know an out of work accountant... Haha
This.
Some knowledge I'll throw at you.
Texas allows you to NOT carry a Workers Comp policy - and simply ride dirty. I believe its the only state in the country (other states you can exclude owners when you're formed a specific way but you can't exclude coverage for workers)
Get yourself a long term disability policy. It will be worth the $2k per year. As a business owner, the only reasons that you're not going to go to the shop to work are 1) you're dead. 2) you're sick. or 3) you're out of business.
As for the "your dead" part - assuming you're financing things, the bank may require you to purchase life insurance to cover any loan exposure that you represent for a bank. So most business owners take care of this.
The sick part... If you cut your finger, you're coming back to work that day or the next day, after you leave the ER. If you have the sniffles, you're coming to work. If you have cancer and you're undergoing chemo - you CAN'T work. If you have a heart attack, you CAN'T work. These are the things that a good disability policy covers. The benefit of disability policy over Workers Comp is that its 24hours a day, it includes sickness, and any injury or disability doesn't need to be work related to qualify.
The benefit of WC is that some states have unlimited medical payment coverage. If your state doesn't have that (I'm not sure, NJ does) then there's not much benefit to Workers Comp. Even if it does, if you have major medical coverage, that's not of much benefit.
If you need more help/information, let me know. There's only 12 companies that write true long term disability policies. There's quite a few loop holes in a lot of the policies that exist out there - so you'll want a policy from some reputable company. Federated Insurance, Mass Mutual, Northwestern Mutual.
Business Insurance
In terms of how the business is formed, make sure you're forming as a LLC or a S-corp to shield yourself from the personal liability. Do yourself the other solid and purchase a personal umbrella. You can get a $1million personal umbrella for $150-$500/year. A good business insurance policy should be naming you as an additional named insured and be providing personal protection but the personal umbrella is good to cover any exclusions there may be when someone comes after you personally.
On your business policy, whatever policy you have, you'll have a Garagekeepers section. GK covers any customer vehicle in YOUR CARE, CUSTODY OR CONTROL. I.e., you have a bentley in the shop, rags with oil spontaneously combust you're on the hook to pay for that customers car and to pay the landlord back for the building.
Make sure that your GK 1) has adequate limits. Don't write it at some shitty low limit, if you're working on $200,000 cars. If you work on 3, $200,000 cars at once - have a limit of $600k for GK.
Next, make sure that you have 100% repair and replacement coverage on GK as well. If you have 75% coverage and there's a claim on such a high end car, after your deductible and 25%, you can go belly up.
On your General Liability or Garage Liability policy, make sure you don't have a "Damage to your product and your work" exclusion - which is very common. Again, if you're dealing with super high end cars, if there's a faulty part that you install that's worth $10,000 and it takes 10 hours of actual labor and 20 hours of book labor, the insurance company is going to exclude all that cost from the claim pay out. Something, that again can make you go belly up.
Last thing, make sure that you have adequate building and content coverage. Content coverage is dirt cheap. Typically $0.20-$0.35 per hundred dollars of coverage. Make sure that you have adequate building limits and have legal liability or fire legal liability coverage. If you don't need FIRST DOLLAR building insurance, don't get suckered into purchasing it. (If the terms of your lease don't require you to have first dollar insurance, the landlord will be carrying his own building policy).
If you ever buy a building, make sure you own the real estate in a separate LLC, so if someone slips and falls, you don't lose your business.
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If you have everything I posted above covered, I'd be extremely impressed and AMAZED. I've never talked to a business owner with an insurance policy that I picked up, that I wasn't able to poke holes in and show where there were significant gaps.
i think Wil has "people" - connections all over the business world
good info on the insurance stuff for sure though
where's the pics of the shop already?
good info on the insurance stuff for sure though
where's the pics of the shop already?
lol, im sure if his clients own the kind of cars he works on, he has no issues getting the right connections to the right guys to get this kind of stuff taken care of.
Wil is WAY smarter than he comes across in the forums.
I wouldn't take for granted that he's done his research. However, I advise people with much larger operations, that already seek the counsel of insurance consultants with ample years of experience, and I'm still able to help them.
If anyone was able to give him all of that knowledge, that didn't work for the company that I do, I'd be EXTREMELY surprised. They essentially hire us away from very good jobs and instead of saying "here, we'll hire 100 of you and put you on 100% commission" they hire 10, expect to keep 8.3 people, train us and give us unheard of, guaranteed money, so that we can help people.
I just spent all of Wednesday at the attorney's, planning the estate of a person who owns a multi million dollar landscaping business and another who has a kawasaki and yamaha business. Both very intelligent people, that walked away with their heads spinning of how long they've gone with bad information from CPAs and lawyers.
Wil is WAY smarter than he comes across in the forums.
But then again, I'd have to be
edit: ...and I had all of that down, except the last part about a separate LLC - but, as of now, I won't be owning the building. Good call though
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I never thought about a separate holding company for the property either...
Recked can help you on why that's an even better idea...
Not only do you shift liability to a separate entity to create another legal barrier to get to the company or you personally, but you also can circumvent Social Security tax.
Rent the building back to yourself, rather than paying yourself normal wages. You'll still need to list the rent as income, but you won't need to pay social security or FICA taxes.
Not only do you shift liability to a separate entity to create another legal barrier to get to the company or you personally, but you also can circumvent Social Security tax.
Rent the building back to yourself, rather than paying yourself normal wages. You'll still need to list the rent as income, but you won't need to pay social security or FICA taxes.
self rental or W-2 with an S-corp are the 2 easiest ways to have income flow through not subject to SE tax (aka social security and medicare)
if you're doing the rent try and make it as official as possible, write the check from one account into the other every month so it all has a paper trail
if you do file subS the law requires that you have a paycheck, even if it results in a loss situation for the business
but then any additional income on the K-1 will not be subject to SE
very handy things to utilize, but watch your contributions to SS
so many people get surprised later on in life when they want to retire and can only get very minimal amounts of additional monthly income from SS
I'm not saying it will even be available when it gets time for us to retire, but its just something to have on the table while you're doing your tax planning, and retirement planning.
also, try not to bounce your rent up or down from year to year depending on your bottom line, that just gets a little too skeptical
if you're doing the rent try and make it as official as possible, write the check from one account into the other every month so it all has a paper trail
if you do file subS the law requires that you have a paycheck, even if it results in a loss situation for the business
but then any additional income on the K-1 will not be subject to SE
very handy things to utilize, but watch your contributions to SS
so many people get surprised later on in life when they want to retire and can only get very minimal amounts of additional monthly income from SS
I'm not saying it will even be available when it gets time for us to retire, but its just something to have on the table while you're doing your tax planning, and retirement planning.
also, try not to bounce your rent up or down from year to year depending on your bottom line, that just gets a little too skeptical
Oh, and I said that wrong- smarter than you guys give him credit for, not than he seems on the forums.
where's the pics?
Understood.
Just make sure that you carry adequate limits (based on the square footage and occupancy on the building) on Legal Liability on a property form and not just the standard coverage on the Garage Liability/General Liability form for "Premises Rented to You"
