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That Change in Legal Status
Is about More Than Taxes

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Incorporate your business online! Form your LLC today! The internet is ablaze these days with advertisers telling you that sole proprietor John Jones, doing business as ABC Plumbing, would do so much better as ABC, LLC.

There’s a lot more to those little letters that follow your formal business name than marketing or tax advantages. A change to the legal status of your business involves a long list of serious considerations. Your business insurance should be on that list, but it is often overlooked until it’s too late.

Consider your commercial general liability policy (CGL). Your business’ legal status has many insurance implications. For example, if you maintain ownership or a majority interest in a newly acquired or formed organization, your current CGL coverage might not work.

Most CGL policies will extend coverage automatically for the new entity for up to 90 days or the end of the policy term, whichever comes first, provided the new entity is a corporation or a sole proprietorship. There is no automatic extension in most policies if the new entity is a partnership, LLC or joint venture.

There are solutions. Sometimes the new entity can be added to an existing CGL policy. At other times, the new entity will require a separate policy.

This is just one consideration involving your general liability protection. Automobile, property, workers’ compensation, and every other business coverage each will require its own revisions and updates. So if you are a sole proprietor considering making a change in your legal status, add, “Contact insurance advisor,” to your to-do list. And please – do it before, not after, clicking that “Incorporate online” link.

©2013 Selective Ins. Group, Inc. (Branchville, NJ). "Selective" insurers include Selective Ins. Co. of America, Selective Ins. Co. of New England, Selective Ins. Co. of N.Y., Selective Ins. Co. of South Carolina, Selective Ins. Co. of the Southeast, Selective Way Ins. Co., Selective Cas. Ins. Co, Selective Fire and Cas. Ins. Co and Selective Auto Ins. Co. of N.J. Insurers and products available vary by jurisdiction.