Your store is the scene of a customer falling in an aisle. A man claims that he discovered a piece of glass inside the jar of salsa he bought from your store. You are told by a woman that the face cream from your company caused her severe skin inflammation. Your account is hacked by a key employee. You have to stop all operations because your computers are infected.
If you don’t have the right insurance, these events can be costly.
How can you protect yourself? Legal representation is essential if you are sued. You can also take preventative measures to avoid disaster. These are steps you can take in order to protect your company and personal assets.
Incorporate your company. Bizstats.com says that more than three quarters (75%) of U.S. companies are either sole proprietorships, partnerships or joint ventures. There is no legal distinction between the business entity and the owner, and the owner is personally liable for all liabilities. Legally, the assets of an owner are the same assets as those of the business.
Corporations are legal entities, which are independent from their owners or management. A corporation can own property or pay taxes. The corporation, and not the owners, is responsible for any liability. You are not personally liable for company debts if your company is incorporated. There are exceptions. The bank may require collateral if you borrow money from a small company. This could include your house or personal assets.
Prices for incorporation depend on how complex the business is and how much work it requires. The fees of an attorney can range from $500 to thousands. State filing fees may range from $100 up to $500. Online or at your Secretary of State, you can obtain forms of incorporation.
Get business insurance. Small business owners should ensure that your assets are protected the same way as your house and car. There are many business insurance plans that can cover every scenario.
General liability insurance protects your business from property damage, injury claims, and advertising claims. Also called Commercial General Liability (CGL), this is the most basic type for small businesses.
Professional liability insurance: Professionals providing professional services may want to have professional liability insurance. Also known as errors and oversights, this insurance covers them against liability claims. This insurance protects your company against claims of negligence, errors, or malpractice. Some professions require that you have this policy.
Product liability insurance is a must if your product is sold. This insurance provides protection in case a customer makes a claim against your business based upon a problem with your product.
Home-based business insurance. Homeowners’ policies don’t usually cover home-based business losses. Home-based insurance can include protection for business property, theft, business data loss, professional liability, personal injury and disability.
Workers’ compensation: This insurance is required in most states. It pays for lost wages and medical expenses of employees who are injured while at work.
Internet business insurance: Web-based businesses should consider specialized insurance that covers liability for damage done by hackers and viruses. E-insurance can also cover specialized online activities like lawsuits due to meta tag abuse, banner advertisements, or electronic copyright violation.
Insurance against criminal conduct: Both employee bonds and criminal insurance offer protection from losses due to criminal behavior.
Business interruption insurance: Losses are covered during natural disasters, fires, and other disasters that may cause the business to cease operations for a significant amount of time.
Key person insurance: The company is compensated if a key person dies, becomes ill, or leaves.
Malpractice insurance is required by many licensed professionals to protect against injury to the bodily or property of others, as well as costs associated with defending lawsuits, investigations, settlements, medical expenses, bonds, or judgements that are required in an appeal process.
When you take the necessary steps to protect your business, you will be ready for whatever comes up.