Does a Pty Ltd Protect Engineers from Liability?
Engineers often wonder if starting a company called a Pty Ltd will protect them if a project goes wrong. Many clients ask for millions of dollars in insurance before they'll hire a company, which makes small firms question what is the best way to protect themselves: with a company structure or with insurance?
The Short Answer
While a Pty Ltd company does offer some protection, it doesn't completely protect an engineer from personal responsibility. If a project fails because of something the engineer did or didn't do, they could still be held personally responsible. This is why having good insurance is so important.
How a Company Protects You (and How It Doesn't)
A Pty Ltd company can protect your personal money and belongings from business debts. But when it comes to problems that arise from a project you designed or worked on, the responsibility often falls back on you, the engineer. That's because clients are hiring you for your personal skills and knowledge. So, even though you work under a company name, you are still the one ultimately responsible for your work.
Why Insurance Is a Better Safety Net
Insurance provides a much stronger layer of protection. It can be set up to cover large amounts of money, which is what clients often require. These clients want to make sure they are protected from huge costs if something goes wrong, like a building being unsafe. Without enough insurance, a small engineering company might not even be considered for certain jobs.
The Cost of Insurance
Insurance can seem expensive, but you can find a policy that fits your budget. The cost often depends on the type of projects you do and how much money your company makes. An insurance broker can help you find a plan that meets a client's requirements without costing too much. For example, you may need a lot of insurance for one big project, but not for every job. A broker can help you get the right amount of coverage so you can compete for jobs without spending all your money on insurance.
More Reasons to Have Insurance
Insurance also helps in other ways. If someone sues you, the insurance company will help pay for legal fees and give you expert advice, even if the lawsuit is not your fault. Plus, many clients won't hire you or pay you until you can prove you have the right insurance. Without it, you could miss out on great opportunities, no matter how good you are at your job.
The Final Word
Starting a Pty Ltd company is a smart business move for things like taxes. But it's not a replacement for good insurance. Engineers are always responsible for their professional work. The best way to protect yourself and your company is to have both a strong business structure and a good insurance policy that fits your needs.