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There is a thing called an "umbrella policy" that you may want to look into. Basically, this is liability (law suit) insurance. As the size of your exposure increases past a certain point, you need to consider having it. Usually umbrella policies are in the neighborhood of $3MM+ of coverage, but if you are doing projects that are in the $10MM-$20MM range, you may want to consider more (at least the size of the project). Even people who have just accumulated substantial assets and/or fame (or infamy) frequently carry them to protect their retirement assets, houses, etc.

There are umbrella policies with automatic escalators (or tiered pricing) also. For instance, a large crane operator in NJ that I know has one. The "normal" policy is $3MM. However, if something happens, he gets hit with a huge fee for exercising it but it will automatically escalate to $10MM.

The nice thing is that once you get to the point where you are getting one of these things, you can reduce all your other insurance policies down to the minimum since most of the reason for carrying large auto & home policies (outside of the value of the property) is law suit protection, which an umbrella policy encompasses.

Talk to your insurance rep. about these things. They are really common.


As to incorporation...consider the reasons for doing so. Pay particular attention to the words "piercing the corporate veil". If a corporation has just one employee, one stock holder, etc., then it becomes very hard to prove that there is a distinct difference between the individual and the corporation. You have to take significant steps to demonstrate for the courts that the sole reason for incorporating isn't just escaping liability. In other words lots of paperwork and documentation. Plus, you get to pay taxes on corporate profits and again on the same money when you transfer it to youself. There are other variations that avoid some of these issues such as S Corporations and LLC's.

A web site that I can recommend that may give you some background information about these issues is www.nolo.com. They are the people that publish those "incorporating in XXX State", "Starting a Business in XXX State" and various legal forms that you'll find at the local book store among other places. Their web site is pretty good with a lot of free information too.

Generally speaking, aside from any need for a "business license" (some states require it), if you don't incorporate, and you are doing business as yourself, you just fill out the extra section in your 1040 at the end of the year. Even if you want to use a company name, the cost to do a search (verify that the name is unique) is usually pretty minimal (often a free web search on a state web site) these days, and the cost to submit the form to the state is usually less than $100.

Since you will probably want to talk with a CPA about the tax implications and since CPA's are obviously operating essentially under the same legal context (doing business as a professional in the state you are working in) that you're considering, your CPA may also be the best resource outside of a lawyer to ask these kinds of questions (and the consultation fees will be less). They obviously can't give legal advice, but you can ask them about the details of their own business and why they made certain choices (incorporate or not).
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