Everyone who knows me knows that I am a HUGE stickler for businesses being licensed & insured but why??? (Yes I know this will be a never-ending battle, which I am totally prepared to fight on behalf of all businesses.) If you want to and choose to operate as a "business" then I feel you should be doing the right/legal things that other business owners do...like pay taxes for one. If you want to roll with "the BIG Dogs" and put yourself out there then DO IT! Don't try and cut costs by skipping the legalaties that protect YOU and YOUR BUSINESS as well as those clients who are contracting your services. Believe me it is NOT expensive to have and maintain your licenses and insurance...actually running the business will cost some $$$.
(On a personal note so that you can see it is NOT that expensive: I pay my LLC - $145 every year, my city business license $45 every year and my current business insurance is $45 every month = $730 a year.
** Please Note: This only covers the legal paperwork of owning my business and is in no way the total cost to run my business which is currently upwards of $5,000 a year just to OPERATE it and make ends meet...with NO profit.**)
(On a personal note so that you can see it is NOT that expensive: I pay my LLC - $145 every year, my city business license $45 every year and my current business insurance is $45 every month = $730 a year.
** Please Note: This only covers the legal paperwork of owning my business and is in no way the total cost to run my business which is currently upwards of $5,000 a year just to OPERATE it and make ends meet...with NO profit.**)
You are building a business mainly based on your reputation...
so why would you risk it by NOT being Licensed & Insured??
Why are Business Licenses Required?
Licenses are required for three main purposes:
- To identify your business and make sure you are accountable for your actions
- To protect the public health and safety
- To keep track of your finances for tax purposes
Business License
Business licenses, permits and registrations are a necessary requirement for a business to operate. Business licensing fulfills several functions in our society. As a general rule, business licensing is part of its compliance and accountability to its stakeholders which can include local, country, state and federal government as well as customers and vendors. Depending on the business location, the necessary licensing process can be complicated and costly, fraught with liability exposure for the business owner. On top of that, it may not be easy for the new business to find out about all of the licenses, permits and registrations it needs just to open its door and to keep its door open. The licenses, permits, registrations vary by location of the business including where its product are produced and sold and by the business' industry.
Why Business Licenses are Important
For compliance purposes: business licenses, permits and registrations serve the purpose of advising the licensing authorities that the business is functioning and meeting safety, soundness and tax regulations for the authorities. This is especially important if the business has employees or sells taxable goods and services. This means the business intends to comply with governing laws and regulations and intends to report to the authorities, the information the authorities require for the business to operate. An example is that a business generally needs to procure a federal tax identification number so the Internal Revenue Service can collect taxes on the profits of the business. Failure to do so can have far-reaching civil and criminal penalties for the business and its owners significantly impacting the corporate liability protection for the owners. Another example is that most local governments require a business to procure a business license in order to open their operation. Failure to do so means that the business will not be allowed to operate which also can significantly impact the profits and corporate liability protection for the owners.
- If, for example, a when a restaurant in Colorado Springs opens it needs obtain the necessary licenses and permits from the city, the county, the State of Colorado, and the federal government. The city will probably insist on a basic business license and may be the licensing authority to issue a health permit and a license to sell alcoholic beverages. However, in some states, the state or county authority may be the authority to issue these permits and licenses. The restaurant will need to register with the State of Colorado so it can collect sales tax receipts and withheld payroll taxes. The restaurant will need to register with the Internal Revenue Service so it can also collect different taxes including withheld federal and social security taxes and federal unemployment taxes.
- For accountability purposes: the business licenses, permits, and registrations can assure customers and vendors that it is capable of providing the service or product they are expecting.
- For a customer, an example is a patient would be interested in going to a physician licensed to practice medicine. In many cases, not only does a doctor have a personal professional license, but his practice may be part of a medical institution required to obtain a state issued occupational license for the practice.
- For a vendor, most local, county, and state governments offer lists of business licenses, permits and registrations. Vendors can obtain these lists and contact the business to sell their product or service, helping the business to succeed.
What Is Business Insurance?
The term "business insurance" encompasses all the different types of coverage available to protect business owners from losses. Through business insurance, you can cover your property and business vehicles, insure against legal claims against the business such as liability or workers' compensation, and also provide health insurance for your employees, among other things.
Why Do I Need Business Insurance?
Even if you don't think your business has enough assets to be sued, or if you believe because your business in incorporated, you're shielded from personal liability through the so-called "corporate veil," you still need business insurance. Why?
Because absolutely anyone can be sued, judgments can be collected through wage garnishments and bank account seizures, and even corporate veils can be pierced under certain circumstances; indeed, the smaller your business is, the more likely that you can be held personally liable for debts through your personal assets.
Your business needs business insurance because of the many risks and potential threats to its successful and continued operation; good, tailored business insurance policies can help protect you and your venture as much as possible.
Even if you have a successful business, disaster could strike at any moment and force you to shut your doors. Companies typically carry insurance to mitigate the risk of unforeseen damage. Although it might seem tempting to cut costs by forgoing insurance, business experts like the Small Business Administration (SBA) highly recommend maintaining a business insurance policy.
Considerations
You need business insurance to cover acts of God and general liability, such as malpractice. A patient, for example, might sue a doctor's practice if the nurse accidentally gives him the wrong medication. If you have a business in a flood zone, a flood could destroy your business property and allow competition to move into your market while you rebuild.
Legal Requirement
States often require certain types of business insurance. If you have employees you must purchase worker's compensation coverage through the state or a commercial provider, according to the SBA. Six states require businesses to carry disability insurance, but companies in states that do not require insurance commonly offer it as a benefit.
Benefits
While property insurance covers the damage to any business, even if you run a home business, it does not reimburse you for lost profits. Business interruption insurance pays you for lost sales until you get your business up and running again after a disaster. If you become disabled or too ill to run your company, disability insurance provides a percentage of your income. Additional insurance for overhead provides for expenses, such as supplies and inventory, needed to run your business while you are disabled.
Expert Insight
You should not rely on liability waivers to protect yourself in case of malpractice or accidents because they usually never cover you completely, according to business attorney Nina Kaufman. In some states, you cannot use waivers at all to protect a business from liability.
Tip
Try to purchase all of your business insurance from a single company. Business owner's policies cover the most common types of insurance needed by a business. When starting a business do a risk-management audit to identify potential liabilities and what an accident might cost. Do this risk management analysis every year. Always select with a licensed agent familiar with the risks associated with your type of company.
info obtained from: http://www.companiesinc.com, http://smallbusiness.chron.com, http://www.legalzoom.com
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