Your business may already be in full swing and making money or perhaps in the New Year you plan to launch a business that starts rolling in the dough. Either way you have it, in the back of your head you have that dreaded feeling that something could happen to completely wreak havoc on your dream to be your own boss. You don’t want to lose it. You’ve been working too damn hard to build your empire.
Luckily there are some tricks of the trade and simple ways you can create layers of liability protection to ensure your business is safeguarded. Each of the tools below will offer you some type of protection, but they work best in layers.
#1 – Form a Business Entity
The foundational and core layer is the business entity you select, such as an LLC or Corporation. Forming a business entity essentially separates business from personal assets. For example, if you got into a legal snafu and someone sued you for something that happened in your business, your liability exposure would be limited to the assets in your business. Things such as your home or your car (which are personal assets), would be off limits.
#2 – Get Liability Insurance
The next layer would be having a general business liability insurance policy. They are relatively inexpensive to obtain and customizable to include different types of coverage for different amounts. The scope of coverage will vary, but generally you can expect a policy to cover things such as bodily injury, negligence, personal & advertising injury or property damage that occurs and any defects in the products or services you have supplied. And if you work from home, it’s very likely that your home/renter’s insurance policy does not cover any business items in your home, so you definitely want to check to be sure.
#3 – Create and Use Contracts
Trust me, handshake agreements are not good for business. This layer is sometimes one of the most overlooked for the sake of being in a rush to get things done or FOMO (fear of missing out) on an opportunity, but seriously is one of the most important layers. Having proper lawyer-drafted contracts implemented in your business is a must-do. Period. No exceptions. This will help you make sure your clients or customers understand your policies, how issues and payments will be handled, and also cover you in court if and when you may need proof of what was agreed to. Contracts are truly a no-brainer and you should have them for every relationship in your business.
The Bottom Line
Unfortunately, many entrepreneurs won’t think about these tools and tricks to protect their businesses until it’s too late and the sh*t has already hit the fan. You don’t want to lose everything you have been working hard for. So be sure to consider and include these layers of protection on your list of top priorities if you are launching a business or even if you are already running a business – your business may still be able use a legal check-up to ensure your empire will be protected long term.