Business is a tricky game and knowing how to navigate the legal nuances of the field are beneficial in many ways. Especially for those who are just starting out as an entrepreneur or as part of a startup, a bit of background in the fundamentals of liability will prepare you for some of the contingencies that come with the territory.
While most of your clients and customers will have a positive experience with your business, you need to know how to protect yourself as a sole trader. Accidents happen and, as a sole trader, you also run the risk of being personally liable for any debts that you incur through your business. Making sure that you know the basics of public liability insurance, as well as some simple strategies for exercising your rights, is important.
Let’s look at some specific things you can do to protect yourself as a sole trader.
Take Out Some Insurance
It is wise to take out adequate business insurance to protect yourself as a sole trader. This way, rather than paying out any large debts from your own pocket, you will be able to mitigate the damage that can follow in the wake of an accident and anything that you might be liable for in the course of running your business.
Beyond third-party insurance, it is also a good idea to set up a financial safety net as insurance for yourself as a sole trader. Making sure to set aside enough money for a rainy day, when there might not be as many clients coming in, is important to keep the lights on during slow economic times.
Protect Your Real Estate
As the largest asset that most small business owners will possess, it is imperative that you take the necessary measures to secure your home from potential liability claims. Many sources suggest that transferring the title of your home into the name of your spouse or a parent is a good move to make.
Make Sure To Comply With All Safety Legislation
Any customers that may be injured or harmed while on the premises of your business might end up serving you with a lawsuit that can put you out of business. While nobody hopes that their potential customers will become injured, is important that you do everything you can to prevent this from happening. Posting signs and warning your customers about any potential hazards are good steps to take to prevent the worst from happening to them and your business.
Consider Changing Your Business Entity
While being a sole trader does come with a host of advantages, you might consider changing the designation of your business to remove, or greatly lessen, your personal liability for its activities. Making the move and changing your business to a limited liability company or a corporation will provide you with better personal protection in the event of an accident or misstep.
Do Not Leave Things To Chance
It is foolhardy to simply hope for the best as a sole trader. While you might run your business with the best intentions, anything can happen to upset its fine balance. To avoid a catastrophic risk to your business and your personal finances, make sure to take the steps outlined here and explore how to protect yourself further.
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