Liability Insurance For My Gun Leather Business

[Randyc]

I'm now of the point of shipping out several holsters a week. I believe I should consider obtaining a produuct liability insurance policy. Anyone have any recomendations for an insurance company and how much can I expect to pay for a policy?

Thanks

Randy

[woolfe]

Great topic! I'm subscribed!!!

I just started doing this, and I'm only planing on doing this part time to help get me through school and for fun after that. At the same time I wouldn't mind investing in some insurance. I would hate to lose my assets because of some ignorant idiot who shot himself in the foot/leg holstering a gun with a trigger shoe in a holster designed for a stock gun.

[BOOMSTICKHolsters]

Kevin has some pretty sage advice on this topic, Randyc. Maybe you should shoot a PM his way and see if he will share his thoughts on this subject. You might also look into pre-paid legal representation if a liability policy proves too costly.

note: I am not a lawyer, nor did I stay in a Holiday Inn Express last night.

[Bree]

I'm not in insurance anymore but I can speculate that this coverage won't be cheap by any stretch of the imagination. What I can say is that if I were making holsters the very first thing that I would do is either flat out incorporate (Inc) or organize my business as an LLC. Get your personal assets out of the reach of creditors. There is no question in my mind that you are at higher liability risk than someone making leather belts or the like.

For example...

http://www.ocregister.com/articles/gun-law...579-chavez-shot

My $.02.

[TwinOaks]

Wow, this is something I never considered! Thank You for bringing this subject up, I will definitely have to look into this. My father works in the insurance business and I'll give him a call and seek his input.

Another thought: Can a holstermaker provide a "I won't be held responsible" disclaimer with holsters? With most things horse related (in Alabama) we have an "equine activity law", which states the owner/trainer/stable/et al are not responsible for injury or damage because the person is knowingly participating in a potentially dangerous activity. Could something like that appy to gun related activities?

[Hedge]

I'm not in insurance anymore but I can speculate that this coverage won't be cheap by any stretch of the imagination. What I can say is that if I were making holsters the very first thing that I would do is either flat out incorporate (Inc) or organize my business as an LLC. Get your personal assets out of the reach of creditors. There is no question in my mind that you are at higher liability risk than someone making leather belts or the like.

For example...

http://www.ocregister.com/articles/gun-law...579-chavez-shot

My $.02.

Read the article. I'd arrest the cop for child endangerment and boot him off the force for such negligent and totally brainless behavior.

Hedge

[Bree]

Wow, this is something I never considered! Thank You for bringing this subject up, I will definitely have to look into this. My father works in the insurance business and I'll give him a call and seek his input.

Another thought: Can a holstermaker provide a "I won't be held responsible" disclaimer with holsters? With most things horse related (in Alabama) we have an "equine activity law", which states the owner/trainer/stable/et al are not responsible for injury or damage because the person is knowingly participating in a potentially dangerous activity. Could something like that appy to gun related activities?

A disclaimer like that isn't worth the paper its printed on. It won't stop the lawsuit. For a little business, if you get sued at all, you lose whether you win the case or not. More often than not, you get the insurance coverage just to pay your legal fees.

And... most courts will toss the disclaimer anyway so what good is it?

[TwinOaks]

After speaking with my father, he related that on a small scale (using me as an example) the insurance would be incredibly expensive. There are "non-standard" carriers who would be happy to take your money, though. The scenario we discussed using me as an example is paraphrased as follows:

I make maybe 3-4 holsters/ quarter. Getting insurance for that would start at about $2500. If something happened and I got sued....well, I got nothing to take. I have little to none in tangible assets, and taking the house would put the wife and kids on the street. Were it to happen, I would contact the attourney and explain that I've got nothing worth suing for. Sure, I could get sued for $10,000,000, but there's nothing to get. A lawyer (who'd be suing EVERYBODY) would probably drop the suit against me and go after others.

So for someone like me, well, I almost have "nothing to lose".....well, there's reputation and my beat up old Ford. Lawyers are more usually after money, and won't chase those without it unless they're trying to prove a point.

That's presuming that the holster was at fault in a ND/AD. In the case you referenced, the biggest issue IMO is why a 3 year old wasn't properly secured in a moving vehicle. That and why a Police Officer left a cond. 1 pistol in the child's reach. etc. Probably is gonna do more harm than good, unless it's just a nuissance suit and he's hoping to settle out of court. Back on topic.....the insurance would be worth it if you have a shop and are doing it as a business (incorporating is an excellent idea, per Bree). For me, the cost of the insurance doesn't make sense, so I only build holsters for people I know.

[Shorts]

I've been over this topic as well for myself. I've decided the first step would be to switch from sole proprietorship to an LLC. That may be the most basic step I can take. Next easiest step would be to have a personal rider on home insurance (details would have tro be reviewed but a rider never hurts). From there also pursue business related insurance. I've tried this already by making a few calls. Unfortunately it wasn't as easy as the websites said it'd be. This avenue still has to be investigated further.

[Bronson]

A business savvy friend of mine suggested something like this. Start TWO businesses. The holster making business (in this case) is incorporated or an LLC, thereby protecting your personal assets from lawsuit. The second business can be incorporated or simply be created with a "Doing Business As". This second business owns all the tools and tangibles and leases them to the incorporated holster making business. This way the holster business owns zero tangible assets so there is literally nothing to take.

My accountant girlfriend once told me that her business law instructor (a practicing corporate lawyer) called the LLC the best thing to ever happen for small businesses.

Bronson

[Go2Tex]

Sounds all well and good, but don't you pay corporate tax rates on an LLC?

[Randyc]

A business savvy friend of mine suggested something like this. Start TWO businesses. The holster making business (in this case) is incorporated or an LLC, thereby protecting your personal assets from lawsuit. The second business can be incorporated or simply be created with a "Doing Business As". This second business owns all the tools and tangibles and leases them to the incorporated holster making business. This way the holster business owns zero tangible assets so there is literally nothing to take.

My accountant girlfriend once told me that her business law instructor (a practicing corporate lawyer) called the LLC the best thing to ever happen for small businesses.

Bronson

Very interesting. I'm also a Licensed Private Detective in the State of Illinois. The state does require that I carry a 1,000.000.00 liability policy as a condition of licensing. I pay around $1,200.00 per year for insurance including a firearms endorsement. That business is registered with the county with a "Doing Business As."

It appears I can then register Bulldog Custom Gun Leather as an LLC and have my dba company own all assets. I own no real estate, drive a 10 year old car and 14 year old motorcycle. Outside of my clothes and tools, I own nothing so I have nothing to take.

I guess I can consider going on my happy way or form a LLC for the holster business.

Randy

[K-Man]

Sounds all well and good, but don't you pay corporate tax rates on an LLC?

It depends... Usually when you reach a certain income level, it's recommended that you switch over to an S-corp for tax purposes. You still maintain your LLC status with respect to everything else.

[Bree]

Sounds all well and good, but don't you pay corporate tax rates on an LLC?

Nope. You can select the type of organization that you want for your LLC in most states. Here in NY we can have a proprietorship LLC. Check your own state to see what they allow. Sometimes they have a special tax for LLCs.

For Texas here is a start for your info hunt:

http://www.sos.state.tx.us/corp/forms/205_boc.pdf

Edit: You can choose a corporate form for your LLC and of course you will pay corporate taxes. Just wanted to be clear.

Edited March 21, 2009 by Bree

[Randy Cornelius]

I have my home and farm insured through Farm Bureau, they sold me a business Liability rider that was not that expensive at all. Might look at something simular with your homeowners policys.

Randy

[Lobo]

I have my home and farm insured through Farm Bureau, they sold me a business Liability rider that was not that expensive at all. Might look at something simular with your homeowners policys.

Randy

Randy: I would imagine that what you have as a business liability rider deals with customers coming and going from your premises. The focus of this thread is around product liability, claims that your "inferior" or "dangerous" product resulted in some damage or injury elsewhere. Please speak with your Farm Bureau agent to clarify what coverage you may have.

[Lobo]

Generally speaking, either a LLC (limited liability company) or a subchapter S corporation provides an arms' length between the individual and the business operation; either one treats income as essentially a pass-through, personal income taxed at regular rates. There might be some benefit to having more than one, with assets owned in one entity and leased to the other, but I would imagine that an attorney looking for blood in the water would find arguments to the effect that all that really exists is a proprietorship.

EVERY STATE IS DIFFERENT, SO IF IN ANY DOUBT CONSULT A REPUTABLE ATTORNEY IN YOUR AREA FOR COMPETENT ADVICE. Offer to make him/her a nice holster rig as a retainer! I have made several holsters for attorneys (they seem to deal with some elements that cause them to be cautious).

The whole idea is to avoid the courtroom, and that is where insurance becomes most important. The insurance company has a vested interest in defending your business, so they will pay competent legal talent to deal with claims (whether or not they have any merit). In short, what we are paying for is legal defense, whether or not the plaintiff can prove a claim or not is of little consideration, legal defense is very costly.

Ugly thoughts about this whole line of discussion. We live in an country wherein nothing is ever anyone's fault until they find a deep pocket to blame it all on.

[Shorts]

A resource I have been using that was recommended to me by my father-in-law who is in business suggested I look to LegalZoom.com. As a matter of fact, as we speak I am reviewing their pdf guide to LLCs.

As Bree stated, they can be taxed as a C-corporation or they can be passed through to an individual(sole proprietorship or partnership).

Its important to understand what the Fed/IRS wants as well as what your state wants. By default an LLC is regarded by IRS as a pass through entity. So pay taxes at an individual rate. Unemployment taxes are not required to be paid. But self-employment taxes on any salary and company profits allocatedto them.

...gotta love those taxes

If you're a single member LLC ,you’ll report all your income or losses on your personal IRS 1040 form and attach a Schedule C, Profit

or Loss from a Business. You will also need to file a Schedule SE, Self-Employment Tax Return.

Anyway, as I said, I got this info from LegalZoom. They also offer services to get your business all set up with the Feds and State (for a fee plus the fees the state would charge you. Ex: TX LLC setup is $300). That is something you might want to use or do it yourself.