7 Ways You Can Secure Yourself from Business Risks
If starting a business is your dream, you will need planning and determination to realize it. Apart from your sweat and time, you will be investing money hence you need to take steps to protect yourself and your business from all possible risks. Here are some ways you can ensure financial protection for yourself when doing business.
1. Choose a structure for your business
You can choose to structure your business as a sole proprietorship, partnership, corporation, or limited liability company. If you want to protect your liabilities in case of disputes, you need to structure your business as a Limited Liability Company or Corporation. Such a structure ensures that if your business is sued or suffers losses, your home or personal savings cannot be used to settle disputes or losses.
2. Prepare partnership agreement
Before starting a business with a partner, terms of the partnership should be laid out. It should include, how much time and money each partner is expected to contribute, their decision making powers, and the authority to incur debt for the business. It should also discuss issues such as compensation and profit handling, exit strategy, and policy for handling possible disputes. Take the help of a business attorney to draft a partnership agreement so that your personal and business interests can be safeguarded in case of disputes.
3. Get suitable insure
Take the help of an experienced insurance advisor who understands risks you may face in your business and take suitable cover. Some commonly availed insurances by business firms include:
► General liability insurance - This covers you against injury claims by third parties. So, if any visiting customer falls on your premises, your policy will cover your liability.
► Commercial property insurance - This protects you against loss of property because of theft, destruction, or damage.
► Commercial auto insurance - This will financially cover you in case your vehicle meets with an accident while you are on business.
4. Protect your business from identity thefts
Even if your business is small you need to take data theft seriously. Your procrastination can risk your business and adversely impact the careers of your employees and customers. Follow best practices for digital security and keep the hard copies of data under lock and key. Ensure strategic user data access and use strong passwords to keep your data secure.
5. Always use agreements and contracts
Legal problems can arise when you least expect it and jeopardize your business and financial health. It is better to always work under contracts and agreements and keep yourself protected. Here are some agreements and contracts you can consider using. These will serve as the first line of defense in case of potential legal issues.
► Nondisclosure and non-compete agreements - You can bar your employees from disclosing company secrets to third parties using nondisclosure agreements. While non-compete agreements are used to disallow your employees from starting a competing business closer to your business for at least a certain period.
► Entity operating agreement - In case you have to deal with other people in your business you can avoid legal issues by using an entity operating agreement. This spells out the working relationship of your company with the other person coming under the contract.
► Sales contracts and vendor agreements - Such a contract prevents misunderstandings and safeguards your business when a customer refuses to pay for the service/good delivered.
Take the help of a professional attorney to prepare contracts and agreements as needed.
6. Prefer working with professionals
It is always advisable to work with experienced professionals. The cost of working with professionals is cheaper in the long run as you can avoid the cost of making mistakes. So, always associate with professional attorneys, experienced CPAs (Certified Public Accountants), IT professionals, and technicians.
7. Work with ethics
You started your business with the dream of making it big. Do not risk your efforts by taking short cuts or falling under the trap of increasing profits at the costs by downgrading the quality. This will not help you in the long-term. Paying workers for easier options also puts you at the risk for penalties from federal and state agencies. So, follow rules and regulations and treat customers with great respect and courtesy.
Follow these time-tested strategies to protect yourself from business risks as far as possible and pave way for a long-term successful business.