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When it comes to your new small business, you can never be too careful. You are going to face potential risks around every corner, and that is why you need to come up with a comprehensive plan for protecting your investment.
Establish an Emergency Fund
No matter what steps you take to avoid potential pitfalls, you will most likely run into at least a few financial problems over the years. In the blink of an eye, you could find yourself struggling with shipping delays or other problems that are going to require an immediate influx of cash.
When those situations occur, you need to already have an emergency fund ready. Ideally, your emergency fund will be able to cover almost all of your business expenses for one year. At the very least, you should make sure that your emergency fund will keep you afloat for a minimum of three or four months.
Invest in the Right Insurance Policy
Well before you open your doors or sell your first product, you need to be absolutely sure that you have a solid insurance policy. A serious accident or injury could happen without warning, and your insurance policy is going to be your safety net in those situations. A standard business owner policy is going to include coverage for injuries that take place on your property, theft, vandalism, and minor lawsuits. As your business continues to grow, you might want to extend that coverage to include natural disasters, professional liability issues, and other specific risks.
File as an LLC
Filing as an LLC is another important task that you will need to tackle before you open your doors. If you file as a sole proprietor, then your personal assets could be seized if your business ever faces a major lawsuit or goes bankrupt. With an LLC, your business is going to be a completely separate financial entity that has no connection to your personal assets.
Filing as an LLC can be complicated and intimidating. To file the proper paperwork, you might want to contact a firm that offers LLC formation services. They will be able to get your business up and running before you know it.
You won’t ever be able to protect your business from every threat, but there are a few simple steps that you can take to mitigate your risks. While some of these steps might some like major hassles, they could help you avoid some significant financial and legal problems down the road.
Anita Ginsberg is a freelance writer from Denver, CO. She studied at Colorado State University, and now writes articles about health, business, and family. A mother of two wonderful children, she loves traveling with her family whenever she isn’t writing. You can find her on Twitter @anitaginsburg
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