Dealing with potential legal issues can seem daunting, but ignoring them could bankrupt you.
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July 20, 2021
4 minutes to read
Opinions expressed by Contractor the contributors are theirs.
There are many benefits to being a business owner: controlling your schedule, unlimited earning potential, choosing projects that you really like. But there are also a lot of responsibilities. What if you do not understand the legal elements correctly? What steps should you take to protect yourself and your business? What can you do on your own and when should you hire a lawyer?
It can seem intimidating and overwhelming. But legal issues cannot be ignored, because one mistake can be enough to bankrupt you. The good news is that while hiring a lawyer is often the best option, there are some things you can do on your own without incurring high legal fees. Here are three.
1. Link your business bank account to your LLC
As a lawyer working with small business owners in New York City, I see this mistake time and time again. You go to the trouble of setting up an LLC, and you even go so far as to create a business bank account. But you are setting up the bank account under your Social Security number when it should be set up in your LLC’s Employee Identification Number (EIN). The LLC is intended to protect your personal property from the actions of your business. The only way to do this is for your business bank account to be linked to your LLC’s EIN, not your personal social security number. If you don’t have an EIN, you can get one by visiting www.irs.gov.
Related: 5 Mistakes That Are Sabotaging Your Business’s Bank Credit Rating
2. Take out business insurance
Insurance doesn’t solve all problems, but it can go a long way in reducing your out-of-pocket expenses if you run into legal issues. Lawsuits are expensive, even if you win. Businesses need commercial insurance because it helps cover the costs associated with property damage and liability claims. Without business insurance, you may have to pay out of pocket for damages and legal claims against your business. Depending on the incident, this could be a financially devastating scenario. Plus, insurance offers peace of mind, which cannot be underestimated when running a business. There are different types of insurance that business owners may need, including general liability, professional liability, and data breach. Talk to a broker about your options.
Related: 7 Types of Insurance You Need to Protect Your Business
3. Put legal notices on your website
Related: 5 Tips for a Better Website for Small Businesses
If it’s not in your budget to hire a lawyer to prepare them for you, there are templates online that are a good start. You can then have them reviewed by a lawyer licensed in your state, potentially for a lower price than if they had to prepare them for you from scratch.