Running a business is a great way to maintain control over your schedule and pursue your passion that can also allow you to support yourself and your family. Unfortunately, with all of the positive aspects of business ownership come risks that the general public never has to consider.
For example, when someone comes to visit your business, you could incur liability if they end up slipping and falling in the parking lot or as they enter the building. If you make a mistake in the production of a product or while performing a service for a customer, they may be able to bring a financial claim against you if they experienced property damage or physical injuries as a result.
Obviously, it is in your best interest to minimize the financial risks associated with your business by limiting your personal liability if something were to go wrong. There are a couple of simple ways that you can do so.
Make sure you properly structure your business
Many people view the creation of a formal business entity such as an LLC as nothing more than an unnecessary hoop to jump through when starting a business. While you can conduct business without creating a separate legal entity under which you operate, doing so could be a major mistake.
Business structures help protect you as an individual and your personal assets from claims made by creditors, former employees or your clients/customers. It can also insulate you from personal attacks or lawsuits related to your company's operations.
Don't commingle your finances with the business'
Maintaining multiple bank accounts can be a real headache. Needing to separate a deposit for yourself versus your company can take a few extra minutes that you may not want to spend. However, keeping your personal finances completely separate from the business's finances will prevent anyone from being able to go after your personal assets if they take legal action against your company.
If you routinely deposit money from the business in your personal account or pay bills with funds from your personal account directly, that could leave your assets vulnerable if someone takes legal action against your company.
Make certain that you have adequate insurance coverage
Business insurance policies protect you from all kinds of financial woes, from claims related to defective products to premises liability claims related to someone falling. Making sure that you have adequate coverage in all of the necessary areas can help protect your business from financial liability.
As with motor vehicle insurance, err on the side of caution by obtaining insurance that protects your business and yourself, rather than taking on a low cost and low coverage policy that may not extend adequate protection in the worst-case scenario.