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Don’t Skip This Critical Part of Your Business Plan

Don't Skip This Critical Part of Your Business Plan

You’ve poured your heart and soul into your business—shouldn’t you protect it? Evaluating your insurance needs is a critical part of business planning, one that will help you protect your investment by minimizing risks, liabilities and losses. Of course, it’s also a difficult road to navigate alone. Whether you’re just starting up, hiring your first employee, or planning for future growth, enlist the assistance of a reputable insurance advisor. He or she will help you review a number of factors to select the right insurance for your company structures, activities and locale.

 

Business Profile

The types of commercial business policies you need depend on your unique business profile. Your insurance advisor will consider factors like whether you rent or own your office space, your number of employees, whether you ever use temp workers or contractors, whether you produce goods or provide services, if your company leases or owns vehicles, if your business involves large quantities of cash, and how quickly you could resume business if your office were destroyed in a fire or flood.

Some types of insurance are required by law (such as employer insurance), while other policies are just a good idea.

 

Employer Insurance

If you have employees, state laws require you to pay for certain types of insurance. These include workers’ compensation insurance, unemployment insurance and disability insurance (depending on your location).

 

Commercial Business Insurance

While structuring your business as a corporation or LLC will protect your personal assets in the event of business liabilities, it will not cover losses your business may incur in the event of a lawsuit, natural disaster or other unfortunate event. Commercial business insurance policies include general liability insurance, product liability insurance, professional liability insurance, commercial property insurance, errors and omissions insurance, key executive insurance, business continuation insurance and home-based business insurance.

 

Unexpected Events

You and your insurance advisor should discuss your business risks in regards to unexpected events including the death of a business partner, an injured employee, a customer lawsuit or a natural disaster. Any of these misfortunes can destroy an uninsured business. The amount of commercial insurance your company needs depends, at least in part, on how aggressively you want to manage those risks.

 

Reassessing Coverage

As your business evolves, your liabilities change. Meet with your insurance advisor annually to ensure disaster does not strike while you are underinsured. If you hire additional employees, invest in new equipment or expand your operations, contact your advisor as soon as possible to discuss the implications for your insurance coverage.

While you need to include insurance premiums in your budget when planning your business, many policies are actually quite affordable, especially when you consider the potential losses your business may incur if you choose to operate unprotected.

 

 

Could Your Temp Really Be an Employee?

Could Your Temp Really Be an Employee?

Increasingly, despite the economy, businesses are turning to temporary workers as a way of getting the job done. In fact, by 2020, more than 40% of the US workforce will be free-lancing. That’s nearly 60 million people and it’s pretty easy to see why. Not only is it easy to hire temps as needed, or as revenue allows, they are also typically exempt from benefits and payroll tax withholdings, costing an employer less than a full or part-time permanent worker.

Unfortunately, many business owners don’t really understand the legal difference between a temp and an employee. According to one Department of Labor (DOL) study, 30 percent of employers misclassify workers. It can be a costly mistake, especially as the IRS, DOL ,and state governments are increasingly sharing information to crack down on the problem.

While you should always consult a professional when determining the status of any employee, consider the following basic differences between temporary workers/independent contractors and regular staff.

  • If you control how, where or when the individual performs assigned tasks, he or she is an employee, not a temp worker.
  • If you provide the tools needed to perform assigned tasks (including office space, computer or software) the workers is an employee, not a temp.
  • If you prohibit the individual from performing the same tasks for other businesses, he or she is an employee, not a temp worker.
  • If the assigned tasks completed by the individual are key aspects of your business, the IRS may consider him or her an employee rather than a temp worker.

In the event that a classification dispute goes to court, many take the following considerations into account:

  • What degree of control does the worker have over assigned tasks?
  • What is the worker’s risk of loss?
  • Who pays for supplies and equipment?
  • What types of skills are required to perform the work?
  • Is the work temporary in nature or indefinite?
  • Is the worker an integral part of the business?

While a written contract doesn’t provide guaranteed protection if you’ve misclassified an employee as a temp worker, it is better than an oral agreement should the IRS or courts get involved in a dispute. Make sure you include a description of the services to be performed, payment arrangements, who is responsible for expenses, who will provide materials, a statement that this is an independent contractor/temporary worker relationship, a statement that the worker is responsible for his or her own state and federal income taxes, the length of the project, any circumstances under which you may terminate the agreement, and how you will resolve disputes.