Tag Archives: SBA

Five Tips for Buying Business Insurance

To assess what types of insurance are best for your business, and how to secure coverage to provide adequate protection and minimize risks, use these five steps from the SBA.

1. Assess Your Risks. Insurance companies determine the level of risk they’ll accept when issuing policies. This is known as underwriting. The insurance company reviews your application and determines whether it will provide all or a portion of the coverage being requested. Each policy carries a premium and a deductible. Premiums vary widely and depend on a number of risk factors, including your business location, building type, local fire protection services, and the amount of insurance you purchase. Generally, the higher deductible you agree to pay, the lower your premium will be. When you agree to take on a high deductible you are taking on some financial risk. So, it’s important to assess your own risks before you go shopping.

2. Shop Around. Prices vary from company to company, so it pays to get several quotes. The  Insurance Information Institute recommends that you get the names of insurance companies or brokers who specialize in your type of business. Call several so that you can compare prices and get a feel for the types of services they would provide. It’s also important to pick a company that is financially stable. Check the financial health of insurers with rating companies such as Standard & Poor’s and consult consumer magazines.

3. Consider a Business Owner’s Policy. Insurance can be purchased separately or in a package called a business owners’ policy (BOP). A BOP combines typical coverage options into a standard package, and is offered at a premium that is less than if each type of coverage was purchased separately. Typically, BOPs consist of covering property, general liability, vehicles, business interruption and other types of coverage common to most types of businesses. BOPs simplify the insurance buying process and can save you money. However, make sure you understand the extent of coverage in any BOP you are considering. Not every type of insurance is included in a BOP. If your business has unique risks, you may require additional coverage.

4. Find a Reputable, Licensed Agent. Finding a good insurance agent is as important as finding a good lawyer or accountant. You should always look for one that has a license. State governments regulate the insurance industry and license insurance brokers. Many states provide a directory of licensed agents.

5. Assess Your Insurance Coverage on an Annual Basis. As your business grows, so do your liabilities. You don’t want to be caught underinsured should disaster strike. If you have purchased or replaced equipment or expanded operations, you should contact your insurance broker to discuss changes in your business and how they affect your coverage.

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Does Your Small Business Really Need Insurance?

Today we will try to answer the question “Does Your Small Business Need Insurance?”

The short answer is YES.

If you don’t have business insurance you run the risk of losing more than your business. Without the right type of coverage, a fire, theft, accident, or lawsuit could destroy your business and may put your personal finances at risk.

Whether you are starting a business, taking on employees for the first time, or evolving your business structure, there are many variables that determine the right insurance for your small business. Insurance companies differ in the types of business operations they will cover under the various options they offer. So it’s wise to shop around for coverage options as well as price. 

Since there are such a wide variety of insurance policies available, always discuss your individual business insurance needs with an insurance agent or broker.

There are two fundamental types of insurance – commercial business insurance, which is not necessarily required by law, and employer insurance, which is. Caron Beesley, a small business owner, writer, and marketing communications consultant, complied this summary:

1. Types of Commercial Business Insurance

  • General Liability Insurance – This insurance broadly covers and provides protection against the legal hassles associated with accidents, injuries and claims of negligence.
  • Product Liability Insurance – If you manufacture, wholesale, distribute and retail a product, this insurance protects against financial loss as a result of a product defect that can cause injury.
  • Professional Liability Insurance – If you provide a service to a customer, this insurance can protect against malpractice, errors, and negligence in the provision of those services to your customers. Some state governments require certain professions (e.g. physicians) to carry such a policy.
  • Commercial Property Insurance – This covers everything related to the loss and damage of company property due to a wide variety of events such as fire, smoke, severe weather, vandalism, etc. The definition of ‘property’ is broad, and includes lost income, business interruption, buildings, computers, company papers and money. This is definitely one you should talk to an insurance expert about to understand your specific needs.

2. Insurance Requirements for Employers

If your small business hires employees, you are required by state law to pay for certain types of insurance. Here are the three key employee insurance requirements:

  • Workers Compensation Insurance – Businesses with employees are required to carry Workers’ Compensation Insurance coverage through a commercial carrier, on a self-insured basis, or through the state Workers’ Compensation Insurance program. Visit your state’s Workers’ Compensation Office for more information on your state’s program.
  • Unemployment Insurance Tax – If you have employees you are required to pay unemployment insurance taxes as determined by your state. First you’ll need to register your business with your state’s workforce agency. The State Taxes page on IRS.gov includes links to connect you with your state’s agency.
  • Disability Insurance – In the U.S., it is mandatory to purchase disability insurance only if your business is in one of six locations – California, Hawaii, New Jersey, New York, Puerto Rico and Rhode Island.

Next time we will look at “Five Tips for Buying Business Insurance” from the U.S. Small Business Administration (SBA).

Business Licenses and Permits, Oh My!

Don’t forget that any kind of business you start needs to comply with local, state, and federal regulations related to your business. Failing to do so is one of the most common mistakes new entrepreneurs make. Some of the issues regarding licenses and permits can be handled alone, but some may require the help of a lawyer.

Federal Requirements

Most businesses do not require a federal business license or permit. However, if your business is in one of the following highly regulated areas you should contact the responsible federal agency to determine the requirements for doing business:

  • Broadcasting
  • Drug manufacturing
  • Ground transportation
  • Investment advising
  • Preparing meat products
  • Selling tobacco, alcohol, or firearms

For more information see “Federal Licenses & Permits” on sba.gov

State Requirements

Many states and local jurisdictions require you to get a business license or permit before beginning any business activities. A business that operates without the required license or permit may be subjected to fines or may be barred from further business activity. In some localities, a business operating out of a residence may require an additional permit.

While business licensing requirements vary from state-to-state, the most common types include:

1. Basic Business Operation License – a legal document issued by a local governmental authority that authorizes a person to conduct business within the boundaries of the municipality. Many states have established small business assistance agencies to help small businesses comply with state requirements.

2. Fictitious Name Certificate – a document, usually filed with a state agency, which is required to operate a business using an assumed name or trade name (essentially, any name other than the full, formal name of the individual or company).

3. Home Occupation Permit – a permit that may be required to conduct business from a residence.

4. Tax Registration – if the state has a state income tax, a business owner must usually register and obtain an employer identification number from the state Department of Revenue or Treasury Department. If the business engages in retail sales, the owner must usually obtain a sales tax license.

5. Special State-Issued Business Licenses or Permits – these permits may be required for a business that sell highly regulated products like firearms, gasoline, liquor, or lottery tickets.

6. Zoning and Land Use Permits – may be required to develop a site or property for specific purposes.

7. Employer Registrations – if the business has employees, the owner must usually make unemployment insurance contributions.

In many states, people in certain occupations must have licenses or occupational permits. Often, they have to pass state exams before they can get these permits and conduct business. States usually require licensing for auto mechanics, plumbers, electricians, building contractors, collection agents, insurance agents, real estate brokers, repossessors, and anyone who provides personal services (i.e., barbers, cosmetologists, doctors and nurses). Contact your state government offices to get a complete list of occupations that require licensing.

For more information see:
State Licenses & Permits” on sba.gov;
Starting an Online Business: Licensing Requirements” on E-CommerceLaw.com; or
Business Licenses and Permits” on Entrepreneur.com

Local Requirements

Your local licensing requirements will vary. Some examples include the following:

  • You may need a zoning compliance permit before you can open for business. Make sure the space you own or lease is properly zoned for the specific type of business you select.
  • You may need a special license if you’re conducting business out of your house, a beauty salon for example.
  • Are you planning on remodeling your space? You may need to get a permit, so you will want to check the building codes first.

Where do you go to get a license?
The best place to start is your local city hall or courthouse. See the city clerk, who should be able to direct you. You can also phone the city or county clerk’s office with questions, or look in your local phone book under municipal government offices. Run an online search on Google or Yahoo to find the Web site for your local city hall.

For more information see “Business License & Permits” on myownbusiness.org

Please Note: To help you identify the specific licenses or permits your business may need, the SBA has a tool called Permit Me. Simply enter your zip code and business type to view a list of the licenses or permits you’ll need, together with information and links to the application process.

Is a Business Plan Really Necessary?

The short answer is “yes” and the long answer is “yes but, depending on the size and niche of your business, it does not always need to be a long dissertation.”

There are many articles and websites covering this topic so I am only going to try to help you navigate through the maze. Two great sources of information are SBA.gov (the official website for the U.S. Small Business Administration) and SCORE.org  (business mentoring that is free and confidential).

I have to admit that when I hear the phrase ‘business plan’ I do not get warm, fuzzy feelings. Quite the opposite, I start to get tense and a little nervous. Why? Because it sounds like punishment – you have to write a business plan.

So the first step is to realize that it is in your best interest to write a business plan. It will help you to define your goals and the steps necessary to achieve your goals. It will force you to spend time thinking about the future and how to get where you want to go!

Ken Yancey, the CEO of SCORE since 1993, wrote a blog post last December entitled “A Small Business Plan for the Future” that gives a great response to our initial question: Is a business plan really necessary?

The SBA website has a Business Plan Tool to help you get started. SCORE has a Business Plan Template for a Startup Business that I just downloaded. I want to complete the steps in the SBA’s Business Plan Tool before I start on the actual plan. I hope to do that some time over the next few days. I’ll let you know how it goes.