You go into business to make money, but just one wrong move could cost your company all of its profits or even force it to close. As the owner and operator of that business, you could have some personal liability if the company goes under with unpaid debts or if you lose a lawsuit brought by injured customers or unhappy former employees.
Mistakes lead to liability, and liability could lead to lawsuits. It doesn’t matter if you run a fried chicken restaurant or a used car dealership. When you start a business, there is a constant risk of being liable for injuries to others or property damage.
How do you potentially protect yourself and your business from such risks?
Invest in insurance right away
The most straightforward way of protecting your company from financial liability is to carry adequate insurance. General business liability policies, premises liability policies and even product liability policies are all ways that you can protect your company if consumers or visitors to your business claim that you caused harm to them. The coverage that you carry will help pay the losses that other people suffer so that your business does not have to absorb those expenses.
Have the right company paperwork in place
As a business owner, you can protect yourself by choosing the right business structure. Business formation paperwork and proper separation of financial accounts can help protect your personal assets from creditor claims or lawsuits against the business, depending on the kind of company structure you choose.
If you have any employees working under you, they are a huge potential source of liability. An employee handbook and thorough employment contracts can help protect you from liability as well.
These documents create clear expectations for your workers and provide transparent explanations about what you will pay them and what benefits you offer. Your contract and handbook can also reduce your risk of sexual harassment issues arising at the company or a worker claiming wrongful termination when you fire them.
The exact protections that you need will depend on the scope of your business and what services or goods it provides to the public. Identifying possible sources of liability, like hiring new employees, and then protecting yourself with the right insurance and legal documents can minimize the risks involved with starting and running a business.