If you’re running a small business, something you’ll want to do is to make sure you limit your liability in the case of an accident or other incident. When you’re running a company, you could be held liable for any injuries that happen there or problems with your products. Depending on your company’s structure, you could personally be liable for those issues.
It’s usually a good idea not to be a sole proprietor when there are inherent risks in your business because you want to protect yourself. You could be at personal risk of being sued, and that means that you could lose everything you’ve worked for, even your personal savings. If you separate your business as a second entity, then you have more protection.
What business structures should you consider for better protection?
Two of the potential business structures to consider are the S corporation and LLC. Both of these will give you some protection against lawsuits affecting your personal property. It is a little more difficult to set up these structures than to have a sole proprietorship, but the tradeoff is that additional protection against personal liability.
Remember, you do need to keep up on your business’s paperwork and make sure it’s always in compliance as an LLC or corporation. Failing to do this could open your personal assets up to claims, which is not what you want.
Your attorney can help you set up the right business structure, so you can take steps preemptively to protect your assets. Our website has more information about business liability and why it’s important to consider your business’s structure carefully before selecting one.