Creating and running your own small business is undoubtedly very rewarding, both professionally and personally, but that doesn’t mean that you can afford to overlook the risks. However, you can reduce those risks and your own personal liability by managing your business the smart way. Although no blog article can replace professional legal or tax advice tailored to your own needs, here are some of the strategies that small business owners generally find useful and easy to implement to reduce business liability.
The first thing to do to reduce business liabilities is to select a business structure that limits your liability : by incorporating your company, you are protecting your personal assets from any debt or liability incurred by the business. Make sure you do your own research to decide which structure is best suited to your business. If you’re just getting started, we recommend using Incfile, an excellent resource for researching options and incorporating your business. Once you’re ready to move forward, you’ll find that their system is easy to use and that they provide competitive prices with no tricky hidden fees.
MAKE YOUR CONTRACTS CRYSTAL CLEAR
In order to avoid any confusion, you should draft contracts or work agreements that very clearly state what you are “promising”, what will be delivered and what is out of scope, as well as payment terms and refund policies (if applicable). Please note that this is an important step, no matter who you are dealing with, even family and friends. Providing a crystal-clear contract doesn’t mean you don’t trust the other party, it means you are doing your best to avoid any misinterpretation. People may overlook the importance of written agreements between family and friends, but it is just as crucial, and may save your relationship should a misunderstanding occur.
REQUEST A LAWYER’S HELP
Leave it to the experts and hire a lawyer to review your contract templates, as well as your liability and privacy policies. In this particular area, a pinch of prevention is truly worth more than a pound of cure. “Hiring a lawyer” might sound like a daunting task with a heavy price tag, especially if you are just starting out in business, but do not be discouraged! If you really need to watch your finances, you can turn to LegalCorps for volunteer legal advice. If you’re on a limited budget but have a little bit of wiggle room, Avvo offers on-demand, fixed-fee legal advice and their lawyers can provide help on a variety of issues. Rates start at $39 for a quarter-hour conversation and you can browse the forum for free advice.
OBTAIN BUSINESS INSURANCE
Even if you think all four strategies above are watertight, insurance is your parachute when all else fails. Business insurance comes in all shapes and sizes, so you should do your own research to make sure you subscribe to a policy that truly suits your needs. If you already have home, car or life insurance, check whether your carrier can offer you a bundled rate. Popular insurance carriers in North America that also offer small business insurance include State Farm, Progressive & Nationwide.