Startup Tuesday: 18 Million Sole Proprietorships Exist in the US – But is Yours Covered?
Posted by Guest Author on April 16, 2013 in Startups [ 0 Comments ]
There are over 18,000,000 sole proprietorships currently in operation in the United States, and that number continues to grow every year.
Sole props are very easy to establish, and in many cases there is little or no paperwork to be filed, making it one of the most popular business setups in the country.
Pros of a Sole Prop – Setting up a sole prop is incredibly easy and cost effective for many different types of businesses. In addition, the tax reporting is relatively easy because it all passes through to the owner, meaning there are a couple extra forms to fill out during tax time.
Cons of a Sole Prop – While a sole prop is very easy to setup, it also offers the least amount of protection for the owner. In fact, a sole prop provides little or no protection against liability. That means if someone sues the business, they are suing the business owner. If a court decides the business is liable for something and has to pay money, the owner’s personal assets are fair game.
Luckily for small business owners, there are insurance products that can protect them from lawsuits that arise.
Many of the coverage types available to larger businesses are also options for sole proprietors. This is very important because it can help cover the cost of litigation, rather than paying out of pocket.
Errors and Omissions Insurance
A very popular insurance product in the professional services industry, E&O insurance helps protect a business due to negligence. An insurance agent, for example, may forget to submit a premium check for a client on time.
The result is their homeowner’s policy lapses right before their house burns down. Since the insurance agent was negligent, they could be sued by the client. Errors and Omissions insurance would cover the cost of this mishap, up to the stated amount in the contract.
- E&O insurance can be beneficial for other service industry professionals. Real estate agents who are not incorporated may want to consider this coverage. Anyone in the medical field would want to consider E&O coverage as well, though it is generally referred to as malpractice insurance when dealing with the health industry.
General liability insurance is a must for just about anyone who works with clients, especially ones that visit the place of business. General liability insurance protects against injury claims, property claims and even advertising related claims.
- If customers visit the primary place of business, the company (and ultimately the sole proprietor) is responsible if there is an accident. If a customer slips and falls, resulting in an injury, the medical bills could be coming to the business owner’s house. General liability insurance provides protection against these types of claims.
Getting Business Insurance
Obtaining business insurance as a sole proprietor can seem like a daunting task. There are numerous companies to consider and each one will offer a slightly different plan. The thing to remember when getting business insurance is the agent is more than likely paid on commission.
That means their needs are not always going to line up directly with yours, since their main goal is to make more money. It is important to self-educate before discussing business insurance needs. You do not need to be an expert in the field, but at least have a basic understanding of the different coverage types before talking to an agent. Educate yourself with our Business Insurance Buyer’s Guide.
Once you have a basic level of understanding about the business insurance field, make sure to get quotes from multiple insurance agencies. Each one has their own underwriting guidelines, so the cost for similar coverage can vary dramatically.
Bio: Eric Stauffer is a former agent turned insurance advocate. He reviews companies like Auto Owners Insurance and Farmers. His firm helps to educate consumers and business owners about the different types of insurance products they need, as well as where to get them.