How to Reduce Liability in Your Small Business
There are a lot of small businesses that don’t quite realize how liable they are in the ins and outs of daily business. Even if you don’t work in a business where lawsuits are common, such as a food business, for example, there are still risks that you need to think about and need to plan for. So as a business owner, you need to be able to understand what the risks are for your business, so that you can take steps to help.
As has been mentioned, you might not think that your business is liable, but really, any business can be liable. You might be a consultant, a designer, property owner, a hair stylist, own a store, or be an accountant; all of these are at risk of being sued. The risk might be small, but the risk is still there. Even a small side business that only brings in a small amount of money, still means that you are liable. In fact, if you are a sole trader, then you could be even more at risk, because there isn’t any other cover between a company and yourselves. That means that if your business was to be sued with need for legal fees, and the business couldn’t pay the bills, then it could mean that the court could come after you personally. So making sure that you are taking things seriously in business, is really important.
How to Reduce That Liability
There are some really obvious things that are going to help to reduce your liability as an employer, such as offering the best customer service to make sure that there aren’t unhappy or angry customers that try to sue you. You could also look into something like soft story retrofit contractors to come and refit your office or work building, in order to comply with legislation and help to protect from any future natural disaster or earthquake. But really, there isn’t anything that can be guaranteed; all you can do is reduce your risk. So as a business, choosing a business structure that will mean that liability is a business concern and not an individual one, is what can help from the start, and there are a couple of options to choose from. These options can help to give you some ‘umbrella’ protection of your personal assets, which in short, means that if you were sued and your business is operating as one of these structures, then your personal things like your home, savings, and other money, can’t be touched if there are debts to pay.
One of the first things to consider is an S Corporation. Any business structure will help to protect your personal assets, and for a large number of small businesses can reduce liability through and choose to be an S corporation because it has some benefits, such as pass-through taxation. Another option is making an LLC or limited liability company, which is another business structure or incorporation that will help to protect you personally. It is similar to an S corporation, but there is just a little less formality and requirements.
What You Need to Know About Personal Liability
Once you have chosen which way you want to incorporate your business, you can then have some more peace of mind knowing that if anything happens, you won’t be personally liable for it. However, there are a few things to think about, as it doesn’t mean that you are off the hook, so to speak. So here are some other things to think about.
- If your business is noncompliant, then your assets will start to become quite vulnerable. So it is so important to file paperwork annually, so that you are compliant and pay the relevant renewal fees.
- If you are someone who has personally guaranteed a business loan, then you will still be responsible for that debt. If the business misses a payment, then you will still be responsible for that personally, even if you are an LLC or an S corporation.
- There are many contracts that you might sign in business, and if you do so in your name, then you will be more responsible. So if possible, it is a good idea to sign things in the name of the business, as a way to reduce your own personal risk.
- When you sign a business contract under your name, you’re responsible. If possible, sign all contracts with your business name to reduce your personal risk.
So as you can see, there is some personal liability in business, and as a business, so it isn’t something that should be taken lightly. So it is a good idea to take some appropriate measures to help protect yourself and your business.
Categories: Outside Contributors
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