Whether you’re just starting your new business, or your company has been up and running for a while, protecting the business you have worked so hard to build is essential. However, in the rush of launching a startup and the day-to-day challenges it entails, many entrepreneurs neglect this step.
Here are seven ways you can do to protect your business.
1. Choose the right form of business.
Operating as a sole proprietorship is the default business structure for a one-person business. But while this option may be easy, it's not necessarily the best choice to protect your business. For one thing, the sole proprietorship structure doesn’t protect your personal assets. That means if a customer decides to sue you or a vendor demands payment that your business can’t afford, your savings, home, and other assets could be fair game.
Depending on your future goals for your business, whether you have a partner, and your financing plans, a corporation or limited liability company (LLC) could be better for you. Learn more about how to choose the right form of business.
2. Get legal help.
Legal websites such as RocketLawyer, Nolo, and LegalZoom offer lots of assistance to help you DIY. You can learn about legal issues, find business forms, use templates to create your own contracts, and even set up a corporation. However, sometimes you need a real, live lawyer—and when you need one, you need one fast.
Be prepared by asking other entrepreneurs, business colleagues, and friends for recommendations to attorneys who are familiar with small business issues. Take the time to compare attorneys by scheduling an interview with each before you hire them. If cost is a factor, discuss payment options—most attorneys have affordable solutions for even the smallest business.
3. Find an accountant.
Even if you plan on doing your business bookkeeping yourself, getting a good accountant on board from the get-go is worth the price. Who has time to keep up to date on tax law changes? You sure don’t—but accountants do. Not only can they save you money on your taxes, but they can also provide valuable advice on how to structure your business, the best way to finance business expansion, and how much you should pay yourself.
During startup, an accountant can help you assess your financing needs, advise about whether your financial projections are realistic, and help you put together documentation and a presentation that will convince investors and lenders to finance you.
4. Be smart about new customers.
Unpaid invoices are an unpleasant fact of life for B2B businesses—and they can leave your company high and dry if the cash you were counting on doesn’t come in. Before you take on a new B2B customer, always conduct a credit check to protect your business against unpaid invoices.
Never do business without a contract, no matter how confident you are in the customer's word. If something goes wrong, a written contract may be the only thing that ensures you get paid for your hard work.
5. Buy business insurance.
Most businesses need general liability insurance, and if you provide advice or professional services to customers, you may also need professional liability insurance, also known as E&O (errors and omissions) coverage. Depending on which state you operate in, you may be required to have workers’ compensation insurance.
Other insurance products to consider include key man insurance on your life and the life of other key employees, business interruption insurance (which protects your income if your business has to shut down due to a disaster), and cyber-insurance.
6. Protect your employees.
From an electrical fire that destroys your inventory to a natural disaster like a flood or hurricane, disaster can strike your business at any time. That’s why it’s so important to have a disaster plan for what you will do in case of an emergency. A good disaster plan protects both your business and your people. Create a plan and assign responsibilities for how to get employees and customers out of the building safely, what to do if a disaster keeps you and employees from getting to your business, and how you will keep running even if you can't get to your physical location. Learn more about creating an emergency disaster plan.
7. Protect your business data.
Cyber threats are on the rise, and small businesses are frequent targets. To protect your business, start by making sure to back up your company data and documents and store them securely. A cloud-based file storage solution keeps your data safe off-site and accessible no matter where you are. To protect your business from cyber-crime and hackers, install appropriate firewalls, use business-grade computers and antivirus software, and train your employees in cyber security measures, such as creating strong passwords. SCORE’s Small Business Guide to Cyber Security can help you get started.
Your SCORE mentor can help you determine additional ways to manage risks and protect your business.