As a small business owner, you probably have some degree of liability when it comes to the operation of your entity, but the types of risks you face will vary broadly based on your particular line of work. Some types of business operations, among them food and beverage service establishments, expose you to a considerable degree of risk, but even businesses that do not seem overtly risky can get into trouble if someone files a lawsuit against them.
While you probably cannot foresee every potential lawsuit that comes your way, there are steps you can take to limit your liability as a business owner.
Choosing a business structure that minimizes liability
Certain types of business structures do more to protect your personal assets than others. In other words, if you want to make sure your home, car and what have you are not at risk should someone sue your business, consider establishing it as either an S corporation or a Limited Liability Company. Many small business owners opt for S corporations because they limit your personal liability, and they also offer a number of benefits come tax time. Others opt for LLCs, which are somewhat similar to S corporations but generally less complicated.
Additional tips for minimizing liability
While establishing your business as an S corporation or an LLC from day one will limit your level of personal liability if someone sues your company, an S corporation or LLC only limits your liability for as long as you keep up with your annual paperwork and, if applicable, any renewal fees. Additionally, if you sign any contracts with your own name rather than your business name, this, too, exposes you to potential lawsuits, so it is wise to always sign contracts with your business name.
Owning your own business can be tremendously rewarding, but it also has inherent risks. Learning how to minimize those risks is essential for protecting yourself and your livelihood.