When starting a new business, it is important to understand liability—you may be at risk if something goes wrong with your business. Especially if you work in the food-service industry, where lawsuits are a common occurrence, your personal assets may be at risk. Here are some tips on how to minimize your risk.
1. Choose the right business structure
The best way to reduce personal risk in your business is to separate you as an individual from your business by incorporating your business. Protections against personal liability are available only by incorporating your business with the state.
The S Corporation and the LLC are the most popular options. Both corporations protect your personal belongings. This means that your home, car, savings and other personal assets will not be used to pay your business debts.
2. Hire an attorney
It is a good idea to hire an attorney. Make sure the attorney is familiar with your business industry and knows the local laws and ordinances for the area in which your business operates. Your attorney can advise you on how to structure a business to meet your needs and provide proactive tools to settle disputes.
3. Keep work and personal finances separate
Even if your company is an S Corporation or an LLC, you must have well-kept records and proper documentation of all business information. Your business must have the company name on all documents. Keep record of all transactions, contracts and tax information.
4. Keep good records
Keep documentation of your business’ transactions. Documentation of paid bills, invoices, receipts, account statements, payroll documents and gross income are important for tax purposes and can help support your case if you are being sued. Make sure to back up your documents and keep them for three to five years.
5. Get proper insurance
The right insurance policy will protect your business. It is important to research what type of insurance coverage you need. If you are a restaurant owner, general liability insurance may be good for your business. This type of insurance covers personal injury and property damage claims. Since slip-and-falls are prevalent in the food-service industry, you will want to have personal injury coverage.
6. Run your business the right way
Do your best to provide quality service to your customer. Don’t do anything that you know could be considered negligent or fraudulent. Be honest with your customers and keep their best interest in mind. Having satisfied customers reduces your chance of getting sued.
Following these best practices reduces your liability and keeps you protected. As the business owner, it is your responsibility to limit risk and keep your business running smoothly. Remember to seek legal council and invest in a good insurance policy, especially if this is your first business venture.