by Kevin Faber, founder of Silver Summit Capital
Liability is an element that any entrepreneur has to consider when starting a business. The level of liability that different professionals have to deal with differs widely. Experts such as physicians, hoteliers, day care owners, and therapists have high levels of accountability, which they must consider when starting a practice. There are also risks that apply to general businesses such as advertising, web design, and writing. Regardless of the size of an entity, understand the liability risks that could arise.
Even if there is minimal chance that you could face a lawsuit or have to pay for damages, it’s still a good idea to prepare yourself. There are several ways that you can reduce the consequences of a liability case, and one of that is getting business insurance. Whether a company is a sole proprietorship or a partnership, business liability insurance will be effectual. The alternatives when looking for insurance are numerous. A good way to do it is to get different insurance quotes and evaluate the offers and premiums to see if they resound with your business requirements. What are some of the risks that your new business may face?
One area that all startups must be careful with is employment. Being responsible for the hiring and firing of different workers comes with high risks of liability. There is a lot that you have to watch out for when recruiting individuals for your new venture. You have to think about compliance with nondiscrimination laws, meeting a diversity quota, wrongful termination claims, and appropriate compensation. Remember that the more diverse a workforce is and the more it grows, the higher the exposure to liability.
2. Cyber Insecurity.
In today’s world, entrepreneurs conduct a majority of their businesses online. As convenient as the internet makes business operations, it also presents some risks. The threat of hackers, cyber thieves, and data loss are very real and very prevalent. Of course, entrepreneurs invest in cyber security, but it is hard to eliminate all the risks. It may also be difficult for a startup to afford sophisticated security. Cyber theft can leave you facing major liability issues with clients.
3. Accidents on Your Premises.
Unless it is an online venture, this is one issue that applies to all businesses. Cases of slips and falls and workplace injuries are not new in any sector. Even with the strictest safety measures in a building, it can be difficult to avoid such cases. A simple mistake of a cleaning crew forgetting to put up “wet area” warnings can cause you a lawsuit. Cases of accidents are not restricted to visitors only but your employees as well. Workers should have a safe environment to work in, and office equipment must adhere to ergonomics.
4. Errors and Omissions.
Humans err at some point in time, even the most careful ones. Some mistakes in business can cost you a lot of money, clients, or both. When beginning your new venture, understand that having employees means that there are risks of errors being committed in the course of business operations. Some of these may be negligible and may not have a great impact on the growth of an entity, but some can be catastrophic. Imagine a worker mistakenly deleting detailed client reports. Omitting information can also land you in trouble, especially with legal documents.
5. Business Interruptions.
When starting a new company, consider aspects that may influence the delivery of services. Interruptions can be due to any number of things, including bad weather, power outages natural disasters, and poor internet connectivity. It can be very complicated for a new business to handle a disruption. For instance, if you start having distribution problems during the first month of business, clients can sue you and will also lose faith in your abilities. Protecting your company against some forms of disruptions such as natural disasters can be difficult, but you can minimize the severity of the after effects.
Kevin Faber has been in the commercial finance and banking industry for most of his professional life. He graduated at UC Davis with a B.A. in Business/Managerial Economics. His experience in credit analysis, finance, and management led him to be the founder of Silver Summit Capital. He enjoys working in the financing industry and building connections with industry leaders.