The great American dream for many people, particularly people with an entrepreneurial spirit, is to start their own business. The idea of servicing others through products or services allow individuals to feel a sense of community, involvement, and success within their local communities, nationally, and worldwide.
Many entrepreneurs are dedicated people, usually focused specifically on their chosen field of business – but unfortunately the world does not always commend dedicated behavior and creative ideas – some people may try to come after everything you want to build for the purpose of competition, money, jealous, etc. Whatever the reason others may attempt to rain on your parade, you need to make sure you are covered from the sharks, which will relieve stress and ultimately allow you to concentrate on what is important.
Many start-up companies or small businesses do not have the equity or cash flow to hire the top lawyers to defend them against liabilities involved in running a business – more so protecting the owner’s personal assets from lawsuits and fraud. If you follow these simple steps, you will be covered under liability, both personal and professional, without breaking the bank for hotshot lawyers and representatives.
The Essentials to Protecting a New Business in Three Steps
1. Formulate the Right Company
There is really no reason in the world you should not formulate a company if you are doing business that involves assets, patents, or liable services. When creating a company, all you are doing is forming a particular entity that umbrellas a set of assets, cash liquid, or patent technology. Forming an LLC, even if you are a single business owner, is the best possible route because of the coverage it provides, as well as the tax benefits at the end of the year. By forming a company as an LLC, your investors and business owners are protected from double taxation, which is one of the ‘dooming’ qualities of incorporating your business. Unless you are taking your company public or looking for seed money from various investors in the near future, incorporating your business is just another way to pay taxes on dividends and owner equity. An LLC means ‘Limited Liability Company’ which allows owners and investors protection against personal litigation and lawsuits of personal assets or liquid cash.
Even if you do not have insurance, formulating an LLC is the best way to protect yourself and your assets by simply creating a separate entity that is not linked to your name or family’s assets. For example, if you are personally wealthy and want to start a business building cranes and you don’t form an LLC, but instead start selling manufactured cranes to third parties, you are putting your entire personal wealth at risk. If one breaks and kills someone, that person’s family can sue you for personal assets because there is no company registered under the crane creator. If you are poor and start a company with the same lawsuit, they can still require you to owe money in the form of retribution payments on future income. With an LLC, you simply declare no assets or cash and bankrupt the company – people cannot sue something that has no money or doesn’t exist anymore.
2. Eliminate the “First Come, First Serve” Problems
Many famous business enthusiast always say that success in the business world is about three things; being smarter, being a cheater, or being first. As much as we want to eliminate cheating, it does exist, which is why you must protect yourself on all fronts initially. The idea of being first to something immediately provides value to the longevity of your company or organization. Protecting yourself involves filling all of the holes within your company before someone digs them up, which is the smart approach to business. For example, if you are creating a new product or a variation or a product, apply immediately for a provisional patent. They are relatively inexpensive and allow your company time and equity to bring your idea to market before larger companies replicate it. In addition, having patents on certain technology immediately provides equity in your company and attraction from larger entities.
Companies like Google and Facebook want to buy other tech companies because of the patent technology they have, which in turn creates customers and value on the internet. If your company has an idea and does not protect it, someone smarter, faster, or a cheater will surely take it from you without compensation.
In addition, when you formulate your company, buy real estate on the internet for future brand recognition and protection against competition. For example, even if you sell widgets to distributors and never use the internet a day in your life, if you do not buy your web address and your company takes off, competition may buy it and will have the right to put whatever they want on the site, saying that your company ‘ABC widgets’ is a horrible con-artist company. You don’t want that! Mark Zuckerberg had to pay a guy $200,000.00 for www.facebook.com when he initially registered www.thefacebook.com to network solutions. This was actually a success story for Zuckerberg, where we could have potentially charged millions for a simple domain name.
3. Find a Reputable, Cost-Effective Commercial Insurance Company
Most small companies tend to ‘roll the dice’ when it comes to insurance become of the premium cost in holding a commercial license for selling, distributing, and manufacturing what they do for business. This is why it is so important to formulate an LLC if you are doing business that could potentially have consequences if something goes wrong – the plaintiff will not be able to suit you for personal assets and your company can be dissolved easily.
But let’s say that you are running a multi-million dollar business with over fifty employees and retained earnings over $10 million in the bank. If someone sues your company, they still can not come after your personal assets, but that $10 million in the bank sure begins to look desirable – they are able to come after that cash or other assets equally the retribution for bad business or an accident you had no insurance to cover.
Some industries require seller’s licenses and insurance in order to sell certain products, such as drugs and alcohol. But if you are simply selling water, where you get the bottles from a manufacturer, package the water, and resell to distributors or third-parties, you may not need insurance. What commercial insurance allows you to do is protect your company from complete dissiliency if a major lawsuit were to occur. Commercial insurances works just like health or dental insurance in that there are monthly or yearly premiums and deductibles by you as an entity, but your coverage protects you from multi-million dollar lawsuits if something goes wrong.
Search the internet for the best commercial insurance companies and find one with a low deductible, which is the money you will be liable for if lawsuits were to occur. Large companies have divisions particularly for this reason, were they assist people to deal with risk assessment within the company – i.e. will it cost us more if someone dies, given the probability of occurrence, or if we purchase and obtain a certain type of insurance to cover possible disasters.
If you are a smaller company, I would forgo commercial insurance that costs too much because the likeliness of lawsuits when you are small are not as prevalent than if you are a multi-national entity.
Today’s post was provided by Matthew Hall, professional writer and content creator at www.Heil-Law.com. Matthew believes the hiring of a lawyer is an important decision and should not be based solely upon advertisements.