Starting a new business is a bit of a gamble. A significant percentage of new companies fail within a few years. Entrepreneurs have a lot at risk, not the least of which is the choice to give up their current source of income and whatever resources they invest in a new enterprise.
Yet, many experts advise aspiring entrepreneurs to recognize that risk also represents opportunity. The willingness to take a risk can lead to massive returns on one’s investment should a new company succeed. Of course, it is still smart to take steps to mitigate personal liability when starting a business. The following are some of the ways that entrepreneurs can reduce personal liability risks related to starting a new business.
Identifying and planning and plan for known risks
Every business model has unique risks. There are certain challenges strongly associated with specific industries. Investigating both the business model that an entrepreneur intends to use and the industry in which they hope to operate can help them identify specific sources of liability. They can then structure and operate the business in a way that will reduce those risks.
Carrying proper insurance
There are many different kinds of insurance available to those running businesses. Product liability insurance can protect against a scenario in which a customer gets hurt when a product fails. Premises liability insurance can cover the costs generated if people fall while visiting a shop or a restaurant. Even business interruption insurance can help someone reduce the chance of having massive debts related to operational expenses. Entrepreneurs can purchase insurance coverage that will offset many of the biggest risks they assume when starting a business.
Negotiating appropriate contracts
From reducing the length of a lease when first securing commercial facilities to including mandatory dispute resolution clauses when hiring workers, the terms of a contract can help reduce an entrepreneur’s risk. Every contract an entrepreneur signs will create opportunities and a degree of liability. Those who invest in custom contracts that address specific issues tend to have an easier time enforcing their contracts and limiting personal liability related to business operations.
Taking some of the risk out of a new business venture by being proactive in these ways can help people feel more confident about pursuing their dream of business ownership.