When you’re in business for yourself, risk management is an essential (and ongoing) process. You want to do everything you can to reduce your liabilities.
Where do you start? Here are a few tips that may help:
Use the right business structure
Small business owners don’t always realize that their personal assets can be at risk if they’re sued and their business can’t cover the settlement or award. Limited liability companies (LLCs) and corporations can offer superior asset protection over sole proprietorships and general partnerships. Having a properly structured business is essential.
Have the right business insurance
Are you operating your business from home? You need to find out if your homeowners’ insurance will cover any losses. In general, whether you’re operating out of commercial business or your garage, you can probably expect that you will need a combination of the following:
- General liability insurance to protect against claims for property or bodily damage
- Product liability insurance to protect against defective product claims
- Professional liability insurance if you make a mistake while providing professional services
- Business income, which can protect you in case you can’t operate due to damage to your property
- Workers’ compensation insurance if you have employees
It’s wise to determine which of these types of policies are appropriate for your business.
Put everything in writing
This is the smartest thing you can do, whether you’re drafting a partnership agreement, informing your new employees about the disciplinary policies or making sure that your customers understand any assumption of risk they may be taking, make sure that you have everything in writing – and get signatures.
Is this everything you can do to protect your business? Not by any means. That’s why it’s often best to make sure that you have some experienced legal guidance on your side.