If the entrepreneurial spirit has recently taken you over, chances are your operating your business as a sole proprietor. It’s the most common way to launch your first business and currently about 73% of small businesses in America are operated as sole proprietorships. The sole proprietorship is so popular because it’s simple – no legal registrations or time consuming reporting is required. With no stakeholders and no annual reports to file, you have complete control over your business and the disclosure of your financial information. With all this freedom it’s so easy to start your own company. However, nestled amongst the roses of sole proprietorship is one pernicious thorn – personal liability. This is the single biggest challenge that a Colorado insurance broker can help you overcome. We can help you understand what personal legal liability is, give practical examples of how it affects you and teach you how to protect yourself.
You are what you sell
From a legal point of view, you and your sole proprietorship are one and the same – there are no economic boundaries separating you. While this structure offers many benefits in terms of simplicity and ease, the flip-side of the coin is that you are personally on the hook for any misdemeanors that occur in the course of normal business operations. Our role as a Colorado insurance broker is to protect our customers against personal liability concerns.
What’s on the line?
In a corporation or limited liability corporation, the business is registered as a separate legal entity and customers and suppliers have no lines of recourse against the company owners. Conversely, anyone who owes something from a company organized as a sole proprietorship has the right to collect it straight from the pockets of the small business owner. The idea of personal liability frequently comes into play when a business runs into financial difficulties and is unable to pay its debts to suppliers. If the business lacks sufficient cash or other assets to pay off its debt, creditors have full legal rights to go after the owner. As an unincorporated business owner your bank account, car and house are all up for grabs. Even if your company has no outstanding debts you are still on the line for accidents and mistakes in the normal course of business. For example, if you sell a product with defects, consumers can sue your company and in effect, you personally. These events tend to happen out of the blue when you are least expecting them and can be catastrophic if you are not properly covered.
Being a sole proprietor is so easy; you might be one without even realizing it. Do you have a hobby like photography or freelance writing bringing you in a little extra money each month? Congratulations you are a sole proprietor! Any missteps in your work and you could find yourself face to face with a service lawsuit. Properly insuring yourself with a Colorado insurance company is one of the most important strategic moves you will ever make. Get this one crossed off the list by calling us today. Do it before your first transaction and you’ll never have to forfeit your personal assets for the privilege of owning a business.