There are several factors that you should take into account when determining what types of insurance coverage you require: how large or small your small business is, how it's organized (partnership, sole proprietorship, corporation, LLC), the number of employees, how you get paid (commissions, salary, fees), whether your small business is service or product oriented, your exposure to liability and location.
Things to ponder:
Should you die prematurely, do you have enough life insurance to protect your family? Why is this so important? Well, if you have a small service oriented business, it will be worth $0 when you die. Doctors and lawyers are the best example of this because when they pass away, the spouse can't sell the service or the clients (the real meat of the small business.) All they can sell is the equipment that was used for the small business. If you can predict when you might die, you could sell it ahead of time. Otherwise, all small service business owners should protect their families with a minimum coverage of 7X gross income.
But say that at the time of your demise, you want to have a family member take control of your small business. Well, there are two questions that you have to ask yourself. One, are they capable of taking over and, two, are they licensed?
What happens if you're not capable of running your small business because of an injury or a dehabiltating illness? Are you covered with enough disability insurance? Disability insurance will generally pay about 60% of your income for a stated period of time. On top of that, your disability benefits could be non-taxable or taxable depending on whether you claimed the premium as a business expense.
Here's an even more important question than anything we covered before: Do you have enough "business overhead insurance" if you have any at all? Who will cover the costs of running your small business (utilities, insurance, salaries) while you're out of commission? Your small business overhead expenses will not be covered by your disability insurance unless you include it as an add-on.
If you have partners, do you have a Buy-Sell Agreement? This will protect your interest in the business, should your partner suddenly die. Here's a good example: your partner's wife wants to claim her share of the business after your partner dies. Is it in you best interest to have your deceased partner's family involved in the business? They may not know anything about how to run the business and cause huge headaches. This type of coverage would allow you to buy out your deceased partner's share of the business, avoiding any conflicts or interference by outside parties.
Do you have "disability buy-out coverage"? If your partner becomes severely disabled, what would you do? Would you simply keep paying him or her even though you are doing all of the work... possibly for months or even years to come? You wouldn't have to worry about this situation if you have this type of insurance because your partner would be forced, based upon a previously signed and equitable agreement, to sell his portion of the company to you.
Of course, it's entirely possible that none of these problems may ever come up but it's your small business after all. The final step is to determine what types of insurance coverage you believe you require to protect your small business and then call and speak to a professtional who can set you up.
Article Source: http://www.artsymmetry.com
Edward M. Brancheau created The Bank of Green to advise small businesses about subjects like small business liability insurance and to help individuals build wealth through their mortgage.
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