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4 Things to Consider When Starting a New Small Business

4 Things to Consider When Starting a New Small Business

When starting a small business, there are so many things to consider to the point where an owner could really get stuck in the details. But do most owners carefully consider how they may limit liability or any possibility of a lawsuit?

Here are some things to consider when starting a business and to prevent a lawsuit from occurring.

1. Be Mindful of Your Words and Actions

A business owner should also be mindful of words and actions because protecting the business image should be in the forefront of an owner’s mind. This includes but is not limited to being careful of who the business is associated, who the business partners with or uses as a vendor or source, questionable business actions, making slanderous statements, mistreatment of employees, conflicts of interest etc.

2. Retain or Hire a Competent Attorney

You knew this important piece of advice was coming! Business owners should not open their doors without first interviewing and hiring a competent attorney who understands issues common to business owners. Not only can an attorney be useful in entity creation, they can also help with document creation, employment issues, contract review and the advisement on how to react to a lawsuit. The attorney should be quite familiar with local laws and possibly tax issues that could pose a challenge.

3. Obtain Appropriate Insurance

As individuals, we have all types of insurance. We have health insurance, insure our cars, stock up on life insurance, insure our valuables and our homes. Your business is no different. All businesses need to obtain and carry liability insurance. There could be a slip and fall or a different kind of accident on the business premises and the company should be protected in the event of such a thing occurring. Should the business operate with a formal board of directors, it may also be ideal to obtain directors and officers liability insurance to protect the board’s personal assets in the event of lawsuit against the company.

4. Learn to See Yourself as a Separate Entity from Your Business

While Sole Proprietorship is the business entity selection for many small businesses, it is important for owners to separate themselves from the business. Selecting this business entity allows for the business owner’s personal belongings and assets to be vulnerable during a law suit should the company be sued.

One way to avoid this is incorporating, which separates the business from the individual owner(s). This could protect the business owner’s home and personal assets in the event that the business is loss. Another solution would be to place the business into a trust and have the trust actually own the business. A trust, is an actual legal entity that can own property, file taxes and obtain assets.

At the end of the day, your business is an investment in yourself, your family and your future. You, as a business owner must always seek its best interest and protect against any liability or potential lawsuit. With the above mentioned suggestions, you can protect one of your greatest assets and have peace of mind in the process.