There’s a fine line between being reckless and overly cautious. But if you’re going to lean to one side or the other, it’s almost always better for an entrepreneur to be safe and conservative with how they protect the best interests of the business and stakeholders.
4 Simple Ways to Protect Your Business
Think of your business like a baby. While it can breathe on its own, it essentially needs everything done for it. As the parent – i.e. business owner – it’s up to you to protect the baby and keep it safe. Here are some ways you can make this happen:
1. Establish the Right Legal Structure
The first step is to choose the appropriate legal structure for your business. This will determine what sorts of protections you have in place, how taxes are handled, and how business ownership and assets are controlled. For most small businesses, an LLC is the first option to consider.
“The LLC business structure combines the pass-through taxation of a partnership or sole proprietorship with the limited liability of a corporation, creating the best of both worlds for business owners,” IncFile explains. “This means that if you choose to form an LLC, your business will become it’s own legal entity that has separate debts and legal matters.”
Feel free to look at partnerships, S-corps, C-corps, and other options, but you’ll most likely circle back to the LLC.
2. Strategically Utilize Insurance Policie
Insurance can seem like a big waste of money, but it’s particularly important for small businesses. The right insurance policies will safeguard you against issues that could sink your business or, even worse, negatively impact your personal financial situation.
Every business has its own specific needs, risks, and opportunities, but you’d be wise to consider policies like professional liability insurance, property insurance, workers’ compensation insurance, product liability insurance, and business interruption insurance.
3. Use Trademarking and Patents
When it comes to intellectual property, ideas, and proprietary products, services, or methods of doing business, trademarks and patents are your greatest friends.
At first, the idea of trademarking or patenting something may seem overwhelming. And while it does take a lot of paperwork and patience, it’s worth it in the end. You’re free to file these things on your own, but you may find it helpful to work with an experienced attorney who understands the finer details of the process.
4. Be Smart With Partnerships and Contracts
Common sense is the best approach. When dealing with potential business partners, clients, or suppliers, be smart with how and what you disclose. Always remember the mantra that “loose lips sink ships.”
“One of the best ways to secure your idea is to only reveal what is absolutely necessary. If you’re pitching an idea to a potential client, give only the details necessary to convey the idea,” Forbes explains. “It’s not necessary to share every detail of how your product works, for instance, when you can get the same information across by revealing the need your product or service fulfills.”
When you do need to reveal a trade secret or proprietary piece of information, be sure to sign airtight non-disclosure agreements to provide additional protection from idea theft.
Set Yourself Up for Success
There are plenty of factors that are outside of your control, but you should do your best to insulate your business from the most obvious and detrimental risks. Through legal structures, insurance, trademarking, patents, and smart disclosures and business practices, you can keep your business safe and sound for years to come. And, remember, these are just ideas and suggestions. Should you have specific questions or inquiries, an attorney can help you create a plan and fill in the blanks.