There are several ways to structure a small business and each has benefits and drawbacks. Often, people will not engage in any legal formation, running their businesses as sole proprietorships. The benefit here is only in the ability to forgo formation fees, which is a small price to pay for the protections that come with the formation of a limited liability company (LLC) or S corporation. The benefit of these entities is that they shield the owners from certain liabilities, as well as provide tax incentives in many cases. Experts advise anyone running a small business to form a structure of some kind, if only to avoid personal liability when it comes to providing their products or services. For more on this continue reading the following article from JDSupra.
Every now and then a new client comes in who has started a business, but has not incorporated or formed a limited liability company. Sometimes he or she has been operating the business for a while without any such structure. Doing so is foolish.
Almost everyone obtains liability insurance. However, that insurance does not cover all perils. Some business owners also obtain insurance against business interruptions due to perils such as fire, water damage or utility failures. In some businesses errors and omissions (“E&O”) coverage and fidelity insurance (against employee theft or other wrongdoing) is useful. It is important to know what the insurance covers – and doesn’t cover. That is a subject between you and your insurance agent.