Starting a business is exciting, but it also has plenty of challenges to go with it. If you are a new entrepreneur who is trying to get your business off the ground, then you need to become familiar with the many forms of business risk. As you start your business, you should seek out legal advice that will help you to minimize risk and avoid paying for an excessive amount of insurance to protect your business.
Choose The Right Business Structure
The very first decision new business owners make is one that can help reduce their exposure to risk or increase it. Many new entrepreneurs start their companies as sole proprietorships because it can be easier and less expensive to start a business that way. But as a sole proprietorship, you personally assume all of the risk that comes with your business being sued for any reason.
Talk to your attorney about a corporate business structure, or a limited liability company (LLC), that will limit your risk. With a corporate or LLC structure, your business becomes its own legal entity and your personal possessions are protected from any kind of litigation your business might experience.
Consider A Franchise
One of the most significant risks any new business faces is the risk of failure. You can reduce the chances of your business failing by purchasing a franchise instead of starting your business from the ground up. A franchise comes with all of the marketing and operational procedures figured out for you. You can buy into a national franchise that has a high visibility in the marketplace and enjoy success right from the start.
Most franchise businesses also have regular evaluations where the company helps franchise owners to understand where their business might be failing and offer resources to turn things around. While it is possible for a franchise business to fail, you reduce a lot of start-up risk when you purchase a franchise location.
Try Starting Out Part-Time
If you are preparing to embark on a business adventure that is unique and has no precedent for customers to use as a frame of reference, then your risk of failure is very high. You can reduce that risk by starting out part-time and seeing if your idea resonates with your target audience. If your idea does struggle, then you can cut your losses before things get too out of control.
Transfer Potential Liability By Creating Different Divisions
Even if you have a small business, you can still reduce liability by segmenting your business and making each business unit its own entity. For example, if you are starting a real estate investment company and also want to get involved in real estate sales, then you can make each of those two business units their own entities and avoids one damaging the other.
Transferring liability is an important concept for new business owners to learn if they want to protect their companies. Be sure that every subcontractor you hire signs a detailed agreement that outlines their responsibilities and the penalties for not doing the work as outlined. You should have hiring contracts for every employee, and separate independent contractor agreements for people you use to do specific tasks such as marketing.
If your goal is to start your own business, then you need to understand how quickly liability and risk can bring your business down. Along with the right kinds of insurance to protect against potential liability cases, you also need to make the right decisions that will limit liability and allow your company to function without the fear of going out of business because of one mistake.
Laurence Banville. Esq is the managing partner and face of Banville Law. Laurence is licensed to practice law in the state of New York. Originally from Ireland, Banville moved to the United States of America where he worked at law firms, refining his litigation and brief writing crafts. He is also the recipient of the Irish Legal 100 and the Top 40 Under 40 Awards.