For many people, owning a successful business is a dream come true. Unfortunately, not many entrepreneurs give a lot of thought to the type of business ownership that they intend to have. For some, corporations or partnerships are the best option; for others, a sole proprietorship is the way to go.
While there are advantages to each, many people prefer the freedom that accompanies sole proprietorships. This is because they can make decisions on their own without interference from others, and they are easier to set up than LLCs. However, this type of business ownership does carry some risk. Below are a few reasons why you need to consider home business insurance for your sole proprietorship business.
Should a fire or similar disaster occur, it could set you back months – not to mention thousands of dollars. Your homeowner’s insurance policy might not cover claims from your business operations. Without home based business insurance, you may need to front the cost of restocking and renovating your business. Unfortunately, in many cases, it’s easier to just shut down the business and walk away. Coverage through home business insurance makes it possible to rebuild your business in the event that it is affected by a fire or natural disaster.
Running your business as an individual could put you at a greater risk for a lawsuit. If you have customers visit your home office, deliveries that come to your door, or attend fairs and shows to sell your products, there is always the chance that a customer or delivery person could be injured and consequently sue for damages. As a sole proprietor, you could be the one bearing the financial liability. Unlike a limited liability company where the owner and business are two separate entities, the sole proprietor and business are in many cases considered the same entity by law.
In the unfortunate event that the court awards a large sum of money as compensation to the plaintiff (your customer or delivery person), then your home, personal assets, and/or business may need to be liquidated to pay the amount owed. Home based business insurance can help you lessen the pain of a large loss in the event of liability.
Depending on what type of business you’re in, there’s a chance you can be held liable for products that you make and sell that cause property damage or bodily injury. For example, if you make and sell glassware and one of your products has a sharp edge that causes injury to the buyer, you may be responsible for compensating that individual. However,with a home business insurance policy in effect, when a claim comes in, you’ll have somewhere to turn. Legal bills can stack up to hundreds of thousands of dollars; isn’t a small insurance premium worth paying for peace of mind?
While the sole proprietor of a business does not share his or her profits with anyone else, he/she does bear all the risks of day-to-day business operations. The owner must cover rent, wages, salaries and overhead costs. This can be quite stressful when your business is your only source of income. Business insurance can help ease that stress in the event you incur costs if things go south.
Don’t consider insurance for your sole proprietorship as an optional resource; think of it as a necessary safeguard against unplanned hazards and risks. For a small premium, your entity can tap into a resource so you can plan what you will do when you recover, not wonder whether or not you will ever recover. Smart business owners know that constantly worrying about financial ruin is not conducive to growth – after all, you have a business to run!
Remember, when you open for business, it’s of utmost importance that an insurance company you can trust covers your inventory and assets. See if your home based business is eligible through Lindbergh and seek protection today.
DISCLAIMER: This post provides general information related to sole proprietorships. Lindbergh is not a law firm. This information is not intended as a substitute for, and should not be relied upon as, legal advice. It is provided for general educational and informational purposes only. Although Lindbergh strives to ensure that its content is accurate, it makes no guarantees. All legal inquiries should be directed to intellectual property counsel in your State or jurisdiction. Lindbergh is not responsible for any errors or omissions in the content of this post or damages arising from the use of this information under any circumstances.
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