Starting a business is no small feat, as you’ve probably discovered by now. There are so many minute details that require your complete attention. You’re on it, right?
Dealing with and understanding liability, insurance, privacy, and other legal issues all demand a keen eye, even if it’s not the most fun or exciting part of becoming an entrepreneur. Recognizing the amount of time, energy, and resources it takes to start a business will set you up for success.
Let’s explore a few of the nuanced steps for new business owners to protect themselves and their startup.
Protect Your Personal Information
Make sure all public information is the business’s information and not your personal information. Don’t provide more information than is necessary to operate your business. You will have to provide a name and address of your business, but no one should be able to find out where you were born or where you live, for example. If you have a home-based business, you do not have to provide your physical address.
Identity thieves will try to gather as much personal information as they can based on the data you have stored in your computers. Be sure to protect all your personal devices from cybercrime, too. If you don’t feel comfortable implementing a strategy to protect your data, it may be wise to hire a contractor to check all of the places private information may be stored regardless of the size of your business.
The FFC has an online guide for businesses to protect their personal information. Because private information is needed to fulfill orders, make payroll and other business functions, business owners need to know what to do to protect sensitive data so it doesn’t get into a criminal’s hands. Knowing the status of funds and transactions at all times is critical to payment reconciliation, for example.
“If an organization waits until month-end close to reconcile, that’s a 30-day head-start for anyone attempting to defraud the organization,” says account payables platform Tipalti.
Also, keep in mind that the WHOIS directory allows anyone in the world to search all registered domain names, including names of business owners, phone numbers, addresses, etc. This may be OK for some people, but not everyone wants all of their information public. Companies such as GoDaddy offer privacy protection plans that allow you to have control over your domain name information.
Just like you need home or car insurance to protect your assets, you also need insurance to operate your business. You’ll have to determine your specific needs to determine what kind of business insurance you may need.
“Ask yourself what risks must be covered and how much coverage will be sufficient,” says Richard D. Harrock, managing director and global head of M&A at VantagePoint Capital Partners. “Then find and evaluate insurance providers or insurance brokers to determine which companies handle the types of coverage that suits your needs.”
Some of the various types of insurance include general liability, product liability, professional liability, worker’s compensation, property, business interruption, and data breach/cybersecurity insurance. Some tips for choosing the right business insurance include making sure the provider specializes in business insurance, understands the inner workings of your business, has good financial strength ratings, and cares about your business.
Implement a Liability Clause
Contracts between parties contain a limitation of liability clause, simply called a liability clause, that specifies the amount one party has to pay the other if there are damages or losses.
“If a company with a limitation clause in their contract is sued by a contractor, their clause might limit the contractor to only taking the amount for payment they originally agreed upon, rather than additional damages,” according to UpCounsel. “This means businesses are able to enter into contracts without worrying about massive risks with each one. If every contractor agreement could put you out of business, it would be hard to weigh those risks.”
For example, if a client pays a company $6,000 for a new roof and the roof collapses and destroys the client’s property, the company may not be liable for more than $6,000 in damages because of the liability clause.
If you want to be successful and not be one of those businesses that fail within the first two years, you’ll have to jump through the legal hoops. There are currently more than 28 million small businesses in the U.S., which make up 99.7 percent of all U.S. businesses. Unfortunately, nine out of 10 startups fail. By following a few of the tips above, you don’t have to be one of them.