Accountants, tax preparers, and finance professionals who own their own businesses have a lot at stake. Since personal finances are often tied up in business finances, every decision and action you take is important, and new products and services are rightly scrutinized. Take business insurance, for example: the right plan can give your business exceptional protection, but there's a lot of information and misinformation for business owners to sift through. When it comes to choosing business insurance coverage plan for your accounting, tax preparation, or finance firm, it's crucial to understand the costly myths and how to avoid them before making a decision that will greatly impact your company.
Myth One: "No One Will Sue My Accounting, Tax Preparation, or Finance Firm."
Many times business owners tend to think that business insurance is unnecessary because their company doesn't make a lot of extra money — certainly not "enough" money for someone to sue and collect on. After all, don't lawsuits tend to "follow the money?" Not all the time. Unfortunately, anyone and everyone can be sued, and, if a money judgment is rendered against your business, it can be collected. These judgments never "disappear" and can, in fact, be renewed. If your company doesn't have the funds upfront, the judgment may be collected other ways…
- Equipment can be repossessed and sold.
- Wages can be garnished.
- Bank accounts and other personal assets can be seized.
It's important to remember that wealth is always relative, and millionaires aren't the only ones who need to think about asset protection. With a determined attorney at the helm of a lawsuit, everyone is collectable — even when your business's assets may only be $50,000. But for you, that dollar amount might represent years of hard work and resolve. This, perhaps, is the most important reason to make sure your company has sufficient business insurance coverage.
Myth Two: "I Have an Insurance Plan, So My Business Is Completely Covered."
It's easy to assume that, since you have a business insurance plan, that your business's needs are being met. But oftentimes this is wrong. For one thing, not all insurance agencies are equipped with professionals well-versed in the unique needs of startups and small businesses. That's why insureon only works with a select group of specialized agents who are educated in the work accountants, tax preparers, and other finance professionals do.
It's also important to remember that your contract may need to be reviewed and adjusted year to year. Back in the day, many business owners could be assured that their General Liability Insurance could protect them from financial ruin. But today, it doesn't pay to put all your eggs in one insurance basket. There are many types of plans out there, but not everyone makes sense for your company and its specific set of risks.
Similarly, your Umbrella Insurance policy may not offer your company complete protection — more often than not Umbrella and Excess Liability Insurance policies come with very specific limits and restrictions.
Myth Three: "I'm My Only Employee, So I Don't Need Workers' Compensation Insurance."
Depending on which state you live in, local laws may require all businesses to carry Workers' Compensation Insurance, regardless of how many individuals you employ. In other words, even if you are the sole proprietor of your accounting, tax preparation, or finance firm, you may still need to carry this type of insurance.
In other states, coverage depends on the types of workers your business employs. For example, some states do not require you to carry Workers' Compensation Insurance for independent contractors, but they do require coverage for full- and part-time employees. In addition, your client may require you to carry your own Workers' Compensation Insurance so that their company doesn't have to pay for you — their company's plan might automatically assume liability for uninsured contractors.
In addition, it might be a good idea for you to carry this type of insurance so that you might still collect wages, in the event that you are injured on the job or incur a work-related illness.
If you are unsure of your state laws, an insureon agent can help you assess the needs of your business.
Myth Four: "I Run My Business Out of My Home, So I Don't Need Property Insurance. "
A business insurance plan might seem unnecessary if you run your business from your home, but most Homeowner's Insurance policies will not cover your business's damages if they occur in your home office. Too often, accountants and tax preparers only discover this caveat after they go to file a claim.
Your Homeowner's Insurance might protect some of your business-related property, but more than likely that coverage won't ride with you to a business lunch or when you are traveling for work.
A basic, economical insurance plan — like a General Liability or a Business Owner's Policy — is often enough to offer home-based finance professionals and accountants the protection they require for equipment, like laptops, and common client injuries, like slander. And these protections will be in place whether you are in the home office or on the road.
Myth Five: "If Someone Sues My Business, I Can Just Close Shop."
Shutting your accounting, tax preparation, or finance firm in the event of a lawsuit will not necessarily protect you or your business. In fact, the courts don't really care if a company is operational or not. And remember: if the company doesn't have the necessary funds to pay off a lawsuit, your personal assets may be next in line for the chopping block.
Myth Six: "My Business is Protected under the Corporate Format."
Many accountants and tax preparers believe that since their business is a corporation, it is protected under the so-called "corporate format." The corporate format protects individual owners, investors, and officers from personal liability with regard to the corporation's actions for corporate purposes. That's it. Further, under all states' laws, this protection can be removed in some circumstances. If this happens to your business, you may be personally liable and responsible for paying for judgments with personal assets. The terms of this removal of protection varies from state to state, but, generally, the smaller the business, the more likely it will be removed.
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