Limit Your Liability To Protect Your Assets
9076
Finance > Insurance
Mar 1, 2007
Stephen Pope
Limit Your Liability To Protect Your Assets
If your business runs into serious difficulty, will it bring you down too? For example, what if one of your employees got involved in a serious car accident while working for you? Will the resulting lawsuit bankrupt you personally?
Here are just a few ways of protecting yourself against catastrophic losses and lawsuits.
1. Obtain Adequate Insurance Coverage
If someone slips on the sidewalk of your home and injures himself, he could sue you for damages. Your tenant`s or homeowner`s policy may cover you for liability in such an event.
However, what if it is your customer who falls on his way to visiting your home-based business? You will need an extra rider on your house insurance to cover such incidental business use. The extra charge for this additional coverage is well worth it.
If you use a car for business use, insure it for such. Some people think that they are being clever writing off automobile expenses for income tax purposes but at the same time not informing the insurance company that the car is being used for business.
This is false economy. If you ever get into an accident, police and insurance investigators will certainly find out that you used the vehicle for business purposes. If you`re not paying for business coverage, why would the insurance company cover your claim?
As well, what do you think an income tax auditor would think of your claimed business expenses on the vehicle when your insurance policy indicates personal coverage only? Avoid this additional exposure to tax liability.
Be sure to obtain required workers` compensation coverage. Some have been held responsible for all the medical and other expenses of an injured worker, as well as fines for non-compliance to the law. These costs can be quite substantial and even bankrupt you.
Consider obtaining product liability insurance. This applies not just for any products you manufacture but also for products you sell that are made by others.
2. Incorporate Your Business
Insurance may give you some protection against loss. However, you may suffer business losses and lawsuits that may not be covered by your insurance fully. What then?
An extra level of protection can be obtained by forming your own corporation. Even though incorporating yourself will result in extra paperwork and costs, it could be the best insurance you ever bought.
This is because the corporation is a seperate legal entity or person. Even though you may own the corporation, if the corporation operates the business, it is the corporation that will be sued or suffer loss.
If, for example, the corporation had severe business losses resulting in debts that could not be repaid, the corporation would be insolvent. You, as a shareholder, would lose your investment in the company but would generally not be responsible for any of its debts. Thus, you would not have to sell your home or other personal assets to cover the corporation`s liabilities.
On the other hand, there are cases where directors of a corporation can be held responsible for liabilities if they didn`t act responsibly. You can`t hide behind a corporation, commit criminal acts and expect to escape accountability.
3. Protect Yourself With Legal Agreements
Properly drafted written agreements can protect you in many ways. First of all, they can sometimes prevent misunderstandings that can lead to legal problems. Secondly, they may limit your exposure to lawsuits and losses.
Contracts can limit your exposure to liability by including provisions restricting the scope of your work and responsibility, having disputes handled by arbitration rather than through the Courts, and specifying that the maximum damages payable shall not exceed the amount of the contract.
A special area to watch out for is the Internet. There are many laws that impact on websites including matters affecting children, privacy, earnings claims, and unsolicited e-mail ("spam"). Certain agreements and notices on your website may help to protect you.
Protect yourself from catastrophic losses and lawsuits. Take steps today to protect your assets by limiting your exposure to liability.
Here are just a few ways of protecting yourself against catastrophic losses and lawsuits.
1. Obtain Adequate Insurance Coverage
If someone slips on the sidewalk of your home and injures himself, he could sue you for damages. Your tenant`s or homeowner`s policy may cover you for liability in such an event.
However, what if it is your customer who falls on his way to visiting your home-based business? You will need an extra rider on your house insurance to cover such incidental business use. The extra charge for this additional coverage is well worth it.
If you use a car for business use, insure it for such. Some people think that they are being clever writing off automobile expenses for income tax purposes but at the same time not informing the insurance company that the car is being used for business.
This is false economy. If you ever get into an accident, police and insurance investigators will certainly find out that you used the vehicle for business purposes. If you`re not paying for business coverage, why would the insurance company cover your claim?
As well, what do you think an income tax auditor would think of your claimed business expenses on the vehicle when your insurance policy indicates personal coverage only? Avoid this additional exposure to tax liability.
Be sure to obtain required workers` compensation coverage. Some have been held responsible for all the medical and other expenses of an injured worker, as well as fines for non-compliance to the law. These costs can be quite substantial and even bankrupt you.
Consider obtaining product liability insurance. This applies not just for any products you manufacture but also for products you sell that are made by others.
2. Incorporate Your Business
Insurance may give you some protection against loss. However, you may suffer business losses and lawsuits that may not be covered by your insurance fully. What then?
An extra level of protection can be obtained by forming your own corporation. Even though incorporating yourself will result in extra paperwork and costs, it could be the best insurance you ever bought.
This is because the corporation is a seperate legal entity or person. Even though you may own the corporation, if the corporation operates the business, it is the corporation that will be sued or suffer loss.
If, for example, the corporation had severe business losses resulting in debts that could not be repaid, the corporation would be insolvent. You, as a shareholder, would lose your investment in the company but would generally not be responsible for any of its debts. Thus, you would not have to sell your home or other personal assets to cover the corporation`s liabilities.
On the other hand, there are cases where directors of a corporation can be held responsible for liabilities if they didn`t act responsibly. You can`t hide behind a corporation, commit criminal acts and expect to escape accountability.
3. Protect Yourself With Legal Agreements
Properly drafted written agreements can protect you in many ways. First of all, they can sometimes prevent misunderstandings that can lead to legal problems. Secondly, they may limit your exposure to lawsuits and losses.
Contracts can limit your exposure to liability by including provisions restricting the scope of your work and responsibility, having disputes handled by arbitration rather than through the Courts, and specifying that the maximum damages payable shall not exceed the amount of the contract.
A special area to watch out for is the Internet. There are many laws that impact on websites including matters affecting children, privacy, earnings claims, and unsolicited e-mail ("spam"). Certain agreements and notices on your website may help to protect you.
Protect yourself from catastrophic losses and lawsuits. Take steps today to protect your assets by limiting your exposure to liability.
Content Provider: http://www.traffichelp4u.com
J. Stephen Pope, President of Pope Consulting Inc., has been helping clients to earn maximum business profits for over twenty-five years. For profitable Work at Home Small Business Ideas, www.yenommarketinginc.com/ To see how you can profit from incorporating yourself, visit: www.yenommarketinginc.com/incorporation.html
Write a Review
Add to My Favorite
Refer it to Friend
Report Article
Other links owned by this user
By paying a modest monthly fee, you can have ted, sequential autoresponders working for you. Here are seven advantages of using paid autoresponder services. 1. Sequential Autoresponders Although many web hosts offer
Category:
In my e-mail one day, I received the following message: "Hello, I am a subscriber to your ezine and received the attached e-mail. Please advise if this is actually from your website. Thank you." The attachment was from my mailing list
Category:
You would like to increase your income by selling other peoples` products but you just have the money to stock inventory. On the other hand, perhaps you have lots of your own product and would like to increase your sales, but you
Category:
If your business runs into serious difficulty, will it bring you down too? For example, what if one of your employees got involved in a serious car accident while working for you? Will the resulting lawsuit bankrupt you personally? Here are
Category:
Other links at Finance > Insurance
The first part in a series dedicated to finding the best life insurance online. This segment discusses the differences between term life and whole life.
Category:
Today if you're a smart consumer, you will search for the best low cost auto insurance or cheap car insurance rate especially now when insurance rates are not as low as they used to be.
Category:
Medical Billing Is A Smart Career Choice e medical profession is one of the highest-demand fields in the United States today. Every aspect of the field requires skilled and/or highly trained workers, and the billing department is no different.
Category:
With so many different types of insurance now available, it can be difficult for some family's to know which coverage they must have, versus which ones they should have.
Category:
Everybody eagerly looks forward to his or her next vacation. But all your excitement and all the meticulous planning can go astray if something unpleasant and unexpected happens during your vacation. You can better cope with these emergency situations wit
Category:
Site Sponsor
Directory Statistics
Articles: 68285
Categories: 501
Yahoo Entertainment
