There are many small businesses for which liability is a simple fact of life. Cafes, restaurants, bars and pubs all need to consider public liability insurance to protect themselves in the event of a mishap on their premises. Likewise, tattooists, caterers, child care providers and anyone else whose business has an inbuilt element of potential public risk will have ensured that they have their liability covered with an appropriate insurance policy. Other businesses, however, make the mistake of assuming that liability simply isn’t an issue for them. Unfortunately, they’re very often wrong.
Graphic designers, bloggers, web developers, coaches and consultants tend to be small, autonomous operations. They’re often sole traders or small, closely knit teams with very little HR recruitment needs. This does not, however, indemnify them from liability risk. The simple truth is that very few businesses are above the risk of litigation. Keen young entrepreneurs have an “up and at ‘em” approach and want to start trading as quickly as possible. While this is very admirable, these entrepreneurs court danger if they don’t consider their liability before jumping in feet first.
Personal liability and business liability
There are various kinds of small business structures, and if you’re thinking that you don’t have one, then chances are you’re a sole trader. While this is helpful in terms of being a simple business model, it comes with a certain caveat. As a sole trader there are no degrees of separation between your business and you as an individual. This means that if someone takes legal action against your business then they are taking action against you personally and your own savings, assets and property could be at risk.
We tend to be cavalier about this risk when we’re starting out (mostly because we have so little to lose), but that’s no reason not to protect your interests by finding the right liability insurance for your business.
Liability for Ltds
If you run a Limited Company then this is a good step toward protecting your personal assets from litigation but be aware that this does not mean that you have complete and total separation between your own liability and the liability of your business. There are some circumstances under which you may be personally liable, such as:
- If you commit a crime during the operation of your business.
- If your personal actions at work inadvertently injure someone. This applies to Uber drivers, physicians and medical consultants.
- If you act as a personal guarantor for your business loan, you will be liable for your debt. Your contract will be made out in your name rather than the name of your business.
While liability should certainly never be a reason for entrepreneurs to think twice about starting a business, it is something for which healthy provision should be made in every business plan, whether you intend to set up a Ltd or establish yourself as a sole trader. By thinking carefully about the right structure for your business and paying close attention to the right kind of insurance policy for your business you can ensure that your fledgling enterprise is bulletproof.