How do you protect yourself when you start a small business?
To stay protected, you have to know what you’re protecting yourself from. There are many financial risks involved in starting a business, and you want to keep your assets safe. As you get your business off the ground, talk to financial advisors and attorneys about what you can do to minimize unnecessary costs.
Pango Financial has assembled a handy guide for staying protected in the small business world. Learn more about the risks you’re taking, as well as how to minimize your exposure to them. Let’s take a deeper look at what you can do to protect yourself and your business.
Purchase Small Business Insurance
As you lay the groundwork for your small business, obtain insurance as soon as you can. Insurance protects you against a variety of unfortunate circumstances, from property damage to theft.
Which forms of insurance will benefit you most? Many small business owners opt for the following policies:
General Liability Insurance
This policy keeps you covered against property damage and personal injury claims. If somebody sustains an injury, like slipping in a puddle or tripping over a box, you’re covered if they decide to sue you.
Liability insurance also covers any damage your business accidentally causes to a customer’s property. You’ll have the coverage to repair or replace the item that was damaged.
Does your business do a great deal of advertising? If your marketing professionals accidentally use a word, phrase, or image that’s under copyright, liability insurance covers you should the copyright holder decide to make a claim.
Professional Liability Insurance
If your business provides a service to clients, professional liability insurance will cover a mistake made while providing that service. What do those mistakes look like in practice?
- Your accounting firm makes a mathematical error that causes your client to pay too much in taxes.
- Your house painting company mixes up your client’s color choices and paints several rooms with the wrong colors.
- Your wedding planning business was unable to complete an important project in time for the bride and groom’s big day.
In short, professional liability insurance keeps your business covered against claims of misrepresentation, negligence, and inaccuracy of services.
Business Income Insurance
If your business cannot operate due to circumstances outside your control, business income insurance helps you recoup any income lost during that time.
For example, if you own a restaurant and a grease fire destroys the kitchen, you’ll have to shut down operations while you have that damage repaired. With business income insurance, you and your employees won’t have to go without during that time.
Business owners who operate in areas that are prone to natural disasters, like hurricanes in Florida or wildfires in California, benefit greatly from this type of insurance.
Commercial Property Insurance
Speaking of disasters, it’s essential to keep your business’s properties—some of your greatest assets—covered against unforeseen damages. Commercial property insurance covers any retail or office space you use, as well as your equipment and inventory.
Imagine your business experiencing any of the following damages:
- Destruction from a catastrophic weather event
- Graffiti damage
- Property loss from burglary or shoplifting
Commercial property insurance will cover your losses if your business suffers any of the above damages.
Data Breach Insurance
Do you have a computer system within your business that holds customers’ credit card information? Small businesses are particularly susceptible to interference from hackers, as well as simple human errors. While additional security measures like two-factor authentication can help prevent data breaches, you want to be properly covered in the event any data is compromised.
Data breach coverage helps you pay for costs associated with offering credit monitoring services to customers whose information has been compromised. It’ll also help you pay a PR firm to deal with any public fallout.
Keep Your Personal Assets Separate
In the event your business goes through hard times, you don’t want all of your personal assets to be compromised. While sole-proprietorship businesses are less expensive to get off the ground, they may cost you more in the long run if somebody sues your business.
Talk to an attorney about how you can keep your personal assets and your business legally separate. They may suggest structuring your business as a C-Corp. With a C-Corp., if someone files a suit against your business, your personal assets won’t enter the equation at all.
Maintain a Good Reputation
One effective way to protect your small business against lawsuits is to eliminate potential reasons for someone to sue in the first place. Market yourself as an honest and trustworthy business owner. Use a variety of business funding services to invest in high-quality equipment and inventory that is unlikely to malfunction.
Prioritize positive experiences for all your customers and clients. If a customer has an unsatisfactory experience with you, remediate any harm done and ask what you can do to improve your services in the future.
Keep Your Employees Protected
A high-quality staff is the lifeblood of your company. Therefore, it’s in your best interest to invest in their long-term safety, security, and happiness at your business. How can you get started?
- Purchase worker’s compensation insurance for your business before you start hiring. The law dictates that businesses with more than one employee must carry worker’s comp insurance.
- Invest in basic health insurance policies for your employees.
- When you create your monthly budget, prioritize payroll. If employees’ livelihoods suffer because your business is not doing well financially, they will eventually leave—and they may not have anything nice to say about you afterward.
If you don’t prioritize paying your employees, you open yourself up to lawsuits. Employment law prohibits you from withholding paychecks or paying less than minimum wage.
So, how can you protect yourself when starting a small business? The answer lies largely in a variety of insurance policies. Get insured and be sure to pay those premiums regularly so your business remains covered against any and all circumstances.
Maintain positive business relationships and a good reputation in the community—avoid giving anyone a reason to sue you. Make honesty and transparency your strongest policies.
Are you unsure how you’ll pay all these insurance premiums? Use Pango Financial’s funding solutions tool to seek out an extra boost in startup capital.