Side Work

jtteresinski

Member
Join Date
Mar 2007
Location
illinois
Posts
30
Hello All,

I am assuming some on this board do some side work, i.e. panel wiring, plc programming, troubleshooting, etc., as have I (for a small family co. that I have known since childhood). The work has all been above board, 1099's etc., though I am not incorporated or a LLC.

Have been approached to do some work for a local company that I know is down there PLC programmer. Was wondering what you guys/gals do as far as incorporating, insurance, etc.?


Thanks for the help.
 
Insurance for errors and omissions can be a killer expense, and may not be necessary. I never had it.

You can either set up an LLC or a Subchapter S corporation. Either let you separate personal assets from business liability, and with eitehr you don't get hit with double taxation - company income is treated as personal for tax purposes. Nowadays most people seem to go the LLC route.
 
Some companies won't issue a purchase order to you unless you have insurance. They'll expect you to carry worker's compensation and general liability. The "Erors & Omissions" coverage protects your customers in case you don't do what you said you would.

If you are going to be doing PLC programming on systems where operators could get injured you should seriously consider carrying professional liability coverage. That's the coverage a Doctor would call malpractice insurance and it is expensive. It covers you in case someone claims an injury due to a malfunction of the equipment.

If someone is injured at work, once he accepts the worker's compensation settlement he gives up the right to sue his employer, but nothing prevents him from suing the builder of the machinery or the programmer. Carrying professional liability insurance also obligates your insurance carrier to defend you against a lawsuit.
 
Workman's Compensation is usually mandatory - you can't legally do business without it, just like you can't avoid Unemployment Compensation or Medicaire/Medicaid taxes.

Steve is correct - some companies do require proof of insurance, although that is usually for Workman's Comp and general liability. It usually does not include errors and omissions coverage, but that varies.

You can "go bare" on errors and omissions coverage and do OK - I did for over 25 years. It should be mentioned that when I got started society was a lot less litigious than it is today. If you don't include errors and omissions you have to be careful to avoid "piercing the corporate veil" which means there has to be a clear and total separation of the business activity and finance from personal. You have to be willing to shut the door and walk away from the business if you do get sued.

I'm a firm believer in paying for good advice. Mine is free and worth every penny. Talk to an insurance agent, talk to an attorney. Weigh their opinions, balance it against your own risk tolerance and personal situation, and then make your choice. Remember - lawyers and insurance agents are professionally obligated to determine the worst case scenario and advise you of potential consequences. You need to consider their advice, but you are not obligated to follow it. The cost/benefit and risk/reward evaluation is yours, not theirs.
 
My 2 cents worth…

I have been an independent programmer/consultant in Texas for over 30 years.

You might check with your states requirement for Workman’s Comp. In Texas, if you are the owner of the company and only employee, you may waive the Workman’s Comp Insurance. I rarely get asked if I carry it, when I do I explain to them that my business is a sole proprietorship and that I have the right, under state law, to waive the insurance.

Product Liability Insurance (or Professional Liability Insurance) to protect yourself from consequential damage due to poor programming is almost impossible to obtain and very expensive (as others have pointed out). Being in Houston, I work mostly in the Petro-Chemical Industry. I have never had a customer ask for this type of insurance. (How much coverage would you need should you burn down a Billion dollar plant?) Almost all companies I deal with do require a General Liability type of insurance; usually 1-5 million coverage is required depending on the company. For a company with 1-3 employees it usually runs $750-$1000 per year (again that’s in Texas).
 
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