Being an entrepreneur is stressful, time-consuming, enjoyable, rewarding, and so much more. If you don’t want that “stressful” part to drown out the positives, there are some concrete steps you can take to protect yourself, your money, and your business from a variety of potential threats.
From lawsuits to financial issues to intellectual property theft to cybersecurity and beyond, there are quite a few perils facing today’s entrepreneur. Fortunately, there are steps you can take to mitigate these threats and keep your business moving forward.
In this article, I’ll outline my top seven ways to protect yourself and your business.
Form an LLC
If you want to run a serious business, there are very few situations where it’s advisable to simply operate your company as a sole proprietorship or general partnership. While these entities are extremely convenient to start and operate due to the lack of paperwork and registration fees, they don’t provide any protection for your personal assets.
The big advantage of forming a limited liability company (LLC) is right there in the first two words: limited liability. If you operate a sole proprietorship or general partnership, your business is legally considered to be an extension of your own personality. Since it is not a separate entity from you as a person, a lawsuit against your business is also a lawsuit against you, meaning your house, car, personal bank accounts, and other assets are at risk.
When you form an LLC, either on your own or through a service, you gain a level of protection called the corporate veil that provides a protective layer of separation between you and your business. With an LLC, a lawsuit against your business can only pursue your business assets, while your personal assets remain shielded from your creditors.
Open a Business Bank Account
When you operate an LLC, it’s important to keep your business and personal assets clearly separated. If you don’t, a court could determine that your business is not truly a separate entity from you as a person and allow your creditors to pursue your personal assets.
That’s why it’s essential to open a business bank account. With a business bank account, you can deposit all of your business income into a separate account and then pay yourself a reasonable salary by transferring funds between your business and personal accounts.
A business bank account is a crucial component of maintaining the ever-important separation between yourself and your business. I recommend one to every entrepreneur, even if you’re a sole proprietor or general partner — it simply makes it much easier to track your business income and expenses.
As a related addendum to this point, I’ll add that I also think most entrepreneurs should either hire an accountant or purchase accounting software like QuickBooks. This is another way you can separate your business and personal finances, and it’s also a convenient way to keep track of your income and expenses.
Register Copyrights and/or Trademarks
When it comes to protecting your intellectual property as an entrepreneur, there’s no better method than registering copyrights and trademarks.
Your business name will be reserved for your exclusive use in your state if you form an LLC or corporation, but what about the rest of the country? And what if you want to reserve a unique branding slogan or product name? What if your business sells a product that you want to prevent other companies from stealing?
The process for registering a trademark for a business slogan — or, for example, a copyright to protect the rights to the groundbreaking computer software your company sells — is not that complicated. To learn more, visit the United States Patent and Trademark Office website. Trust me when I say that it’s well worth the time and effort!
Get Business Insurance
Depending on the nature of your business, you may require several insurance policies to cover all of your bases. To protect your business from financial loss, damage, and liability, getting business insurance will become handy in numerous situations.
In general, it’s almost always a good idea for any company to invest in general liability insurance to provide basic protection against things like a customer having a slip-and-fall accident at your business location, along with property damage and advertising injuries (libel, slander, copyright infringement, etc.).
If you have employees, you will also need workers’ compensation insurance. If your business owns vehicles, you should look into commercial auto coverage. Some other popular coverages for businesses include cyber liability insurance and professional liability insurance, along with a laundry list of coverages tailored to specific types of businesses. Look into the policies you’ll need for your business and acquire them as soon as possible.
Business insurance premiums differ from company to company. The following factors will primarily define how much you’re going to pay for your business insurance regularly:
- Years in business
- Size of the company
- Business’s loss history
- Industry and type of business
- Business location
Essentially, a small business with months in the making will have to pay more for its business insurance premiums than a large, seasoned company with years of experience in its industry. This is because small businesses are exposed to more risks of loss than established companies, but keep in mind that this may not always be the case.
Moreover, if you’re still a beginner in the business landscape, having business insurance is always more advantageous than having none. Don’t worry too much about paying for your premiums, because you’ll eventually thank yourself in the future for obtaining them.
Use Professional Contracts
When you’re just starting out as a new entrepreneur, it might be tempting to cut corners by drafting your own business contracts. While hiring an attorney can be expensive, it’s worth it to know that your contracts are iron-clad.
In addition, if you don’t have the money for a lawyer, you can take a look at online legal service providers like Rocket Lawyer, which provides professional business contracts at a fraction of the price you’d pay for an attorney.
Diversify Your Revenue
If you place all of your entrepreneurial eggs in one basket, you’re taking a real all-or-nothing approach to business ownership, which many people aren’t comfortable with. A great way to avoid this problem is to diversify your revenue streams by offering additional products and/or services that align with your core business function.
For instance, if you own an LLC that offers lawn and garden services, you could start providing snow removal in the winter or offer classes to help people learn how to care for their own gardens. Anything that diversifies your incoming revenue is a good idea in my book!
Virus Protection for Your Website
You might be surprised by how often hackers and other cyber-criminals target small businesses. With this in mind, it’s imperative that you protect your business website with reliable virus protection software. Additionally, you should regularly change your login passwords to keep would-be attackers at bay. These are simple steps, but the protection they provide is invaluable to any entrepreneur.
Depending on the exact nature of your business, some of these tips may be more helpful than others. Overall, I’m a firm believer in protecting my investment in any way I can. The saying “better safe than sorry” may be a cliche, but that certainly doesn’t mean that it’s not true!
Some of these tips cost money, some of them require a significant time investment, and some of them will require both time and money. However, I think it’s worthwhile, even if you never need to file a claim on your insurance policy or have to deal with a lawsuit.
The simple peace of mind you’ll get from knowing your business is protected is invaluable, and if you ever do have to deal with any of these issues, you’ll be fully prepared to face them head-on.
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