Running a small business is often about taking and managing risks. Market risks are normal but business and tax risks are another thing altogether. Most business and tax-related risks can be managed as long as you know about them. Here are seven business risks you will want to make sure you have covered.
1. Best Choice of Entity
Are you operating as a corporation, limited liability company, partnership, or sole proprietor? More importantly, is the entity you are operating under providing you with the greatest tax benefits and separation from personal liability? Have you considered the tax consequences of selling your business based on its current structure? If not, you might want to explore the alternatives to make sure you're taking the amount of risk that's right for you. Reach out to ECS if you would like more information about the benefits and risks associated with each type of entity, and the tax implications associated with changing your corporate structure. Whether you're a new business or ongoing, we can help ensure you have the information necessary to select the best entity type for your business.
2. Employees or Contractors
Are your team members properly categorized when it comes to the IRS's rules about employee and contractor classification? Unfortunately, it's not about what you and the people you hire want. The IRS has very specific guidelines and rules to make that determination, so if you decide to hire contractors and the IRS determines they are employees, you could owe back payroll taxes that can cripple a small business. So you'll want to do the right thing upfront and make sure you and the IRS are in agreement.
Having appropriate insurance coverage is a must to protect yourself from possible losses through a disaster, theft, lawsuit, or other incident. There are many types of insurance to choose from, and you'll likely need more than one. At a minimum, you should consider the following coverages:
Business property insurance, renters insurance, or a homeowners rider to protect your physical assets;
Professional liability or malpractice insurance, if applicable, to protect you from professional mistakes including ones made by employees;
Workers compensation ins