Being in business is exciting but it also means facing challenges and risks every day. These risks and threats to your business can come from innumerable sources, including economic conditions, lawsuits, competitors, and the weather. In order to be able to sleep at night, it’s essential that you adopt a variety of risk management strategies. These are designed to avert catastrophe and provide you with protection to the extent possible. There’s no single action to shield you from the consequences of risks to your business. You need to take a holistic approach and cover your bases. Here are five strategies to consider.

1. Choice of entity

You start a business to make money, but things don’t always work out as planned. If, for example, you can’t pay the remainder of your lease, you may be personally liable for what’s owed. One way to protect your personal assets—your home, your personal car, your personal bank account—is to use a business entity that provides personal liability protection.

A sole proprietorship or general partnership does not provide personal liability protection, but a limited liability company (LLC) or corporation does. The cost of setting up an LLC or incorporating and complying with other administrative tasks associated with having the entity is small compared with the potential personal liability exposure for not having the entity.

2. Insurance policies

There are many statistics showing that it’s not a matter of if but rather when you’ll experience an occurrence that could have been covered by insurance. Carrying adequate insurance coverage can go a long way in protecting you from property losses as well as liability claims. Consider the following types of policies for optimum protection:

• Business owners policy (BOP). This policy for small businesses provides protection for your property (except for excluded events and amounts over the policy limit) as well as liability protection for claims by third parties (e.g., a customer slips and falls on your premises). The policy may also cover employee theft and other occurrences.
• Professional liability coverage. This policy protects professionals from client claims of mistakes (malpractice), negligence, or unfinished work.
• Business interruption policy. This policy provides funds to cover your fixed costs (and possibly loss of profits) following an event that shuts you down (e.g., a hurricane).
• Workers’ compensation insurance. This protects the business for claims when employees have a job-related injury or illness.
• Employer practices liability insurance (EPLI). This covers you for claims by employees and former employees for such actions as discrimination and wrongful termination.

3. Contracts and agreements

Put it in writing…whatever you consider important to your business. This can be requiring employees to sign nondisclosure agreements protecting your trade secrets (client lists, pricing, etc.).

In some cases, you can’t even sue unless you have a…[MORE]

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To read the entire article, visit the SBA blog website, via: 5 Best Risk Management Strategies