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Gerard,

Office/General Liability --> $1,000,000

Workman's Comp ---> even if you are self-employed.  I have sole proprietor
coverage thru the Arizona State Compensation Fund for about $200 a year.  It
uses an "imputed" salary for sole proprietors and I would imagine that
California also has a similar fund.  If you are disabled on the job, you
receive a percentage of that "imputed" salary for the rest of your life.

When I have had employees, I would explain to them that they have the right
to reject workman's comp.  If they don't reject it, they waive the right to
sue me if they are injured on the job.  If they waive WC, they retain the
right to sue me --- and then try to collect.

Valuable Papers Coverage --->  You are just about to turn a job over to your
client and have a fire/flood/earthquake that destroys your calculations,
drawings, etc.  Valuable Papers are generally not covered under hazard
insurance.  How much time and additional personnel would it take to re-do the
work?

Fire, Theft, hazard insurance ---> For *your* business!  Make sure that it
provides for temporary location coverage while repairs are being made.

Non-owned vehicle endorsement on your auto coverage. --->  You send your wife
(or have a gofer employee) in her car to deliver drawings to an architect's
office and she gets in an accident.  Not covered unless you have non-owned
vehicle coverage.  (Sometimes the endorsement is an endorsement to General
Liability.)

Carefully weigh the ability to depreciate the part of your house that you use
solely for your office.  I say this because, while it is good to get the
depreciation, it is bad when you sell your house.  While capital gains on the
sale of a private residence (up to a certain amount) is exempt from taxes on
the sale of your principal residence, the gains on the part that you have
claimed as business use *is not* exempt, plus you have to recapture the
depreciation that you wrote off.

Professional Liability (E&O) Insurance --->  Very low premiums for about the
first three years you are in practice suck you in, then the premiums can
double the fourth year.  E&O coverage is also an invitation to get sued as
the lawyer will know that money is available for his/her fee.  I had coverage
for the first three years I was in practice and when the premiums doubled, I
sat down and carefully read my policy, particularly the exclusions!  I was
not covered if:

>   I am not satisfied with the attorney selected by the insurance company
and want to use an attorney of my choice.

>   If the company wants to make an offer to settle and I don't agree to it,
they will withdraw and I have to retain my own attorney and be responsible
for any award made against me.

>   And a couple of other goodies that I can't think of right now.

Outside the realm of insurance, contact a good CPA and have him/her set up
your books for you and train you, if necessary, how to use them.  A good CPA
is necessary at tax time, particularly in figuring depreciation (accelerated,
straight line, sum of years digits, etc.)  Also discuss with him/her the
accounting method best suited for you; cash or accrual.  Once you make the
selection it is just about cast in concrete as far as the IRS is concerned.

Apply for a federal tax I.D. number (Employer I.D. Number) which you will
have to use if you have employees.

Check with your local government and see if you will need a business
license.  Here in Tucson, we have to have a Business Privilege License at
$24.00 a quarter for up to 5 employees, which is in lieu of the Sales Tax
License that retail/wholesale business must have.  Also, home offices have to
have a CO from the building department.  Some homeowners associations will
not permit home businesses.

HTH

A. Roger Turk, P.E.(Structural)
Tucson, Arizona

Gerard Madden wrote:

. > Well I'm starting my own business as I have found that I'm either
. > "overqualified" or too expensive for most local firms to hire me,
. > especially since everyone is claiming a slow down in the bay area.

. > Anyway, I know there are a number of good engineers on this list who are a
. > small business, either on their own or with a couple of employees. I will
. > be working out of my house until I build up a steady client base. I was
. > wondering if any of you could recommend and/or list the types of
. > insurance I should look into.

. > I know there is professional liability & E+O Insurance. Are these the same
. > thing? What about all the other ones (workers comp etc..) That I should
. > have. I am a sole proprietor at the moment, but I am not sure if there is
. > any real benefit in going Incorporated, but If I did I take it I would
. > then need to get workerman's comp.

. > Lastly, If anyone can recommend places that offer affordable insurance to
. > engineers, I'd appreciate any leads. You can respond privately if you'd
. > like.

. > thanks,
. > -gerard

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