How Are You Protected From Liability?

Introduction

We all merrily go along, running our businesses online at our own pace. Some of us are real ‘go-getters’, spending hours a day on promotion, order fulfillment, and creation. Others are more random, working on their crafts as time permits. Others, still, are somewhere in between. But how many of you have spent any time at all wondering about your liability?  How exposed are you and how much risk are you assuming?

What Is Liability and How Are You At Risk?

No matter what you make, there is liability attached to it.  It may be simply the liability of satisfying an unhappy customer.  Where you are truly at risk is with a product failure or malfunction.  Let’s say you make ladies scarves.  Joan Customer buys one and loves it.  She wears it to work one day and the flowing end gets caught in an elevator door, pulling her backwards and causing her to fall.   She sustains a concussion, and sues you for her medical expenses.  Yes, she can do this…  think back to the McDonald’s customer who sued (and won) over her thighs being burned by hot coffee she placed in her lap while driving. 

There are physical liabilities as well.  What if your canopy blows over in a freak blast of wind damaging another’s canopy or goods?  You are liable for those damages, in addition to your own losses to your equipment and product.  Or… you’re doing a show in a public park.  Kids are running around playing near the exhibits.  One of them trips on your tie-downs and on the way down, hits his head on your table and needs a couple of stitches.

No one can anticipate every possible thing that could go wrong, putting you at risk.  If you really stop to think about it, it could be enough to scare you right out of business.  But there are things you can do to protect yourself.

Buy Business Liability Insurance

No – I’m not an insurance salesman selling you which breakdown cover, and I often think that insurance salesmen and car salesmen are cut from the same mold.  That being said, buying some business liability insurance is perhaps the quickest and easiest thing you can do to protect yourself.  If you are a homeowner, you can add this extra coverage onto your homeowners’ insurance.  That’s how ours is written and it added about $130/year to the premium (a bit under $11 per month).  It’s worth talking to your own insurance agent about adding this coverage to your current policy or buying a stand alone policy.  And honestly – this is just one more component in the cost of doing business.

Label Known Hazards

If you are aware that a component or specific use of your items can be dangerous or hazardous, label the item accordingly.  We all know that plastic wrappers shouldn’t be around babies, but they’re still all labeled.  We’ve all seen toys with not suitable for children under xx years old printed in bold red type prominently on the front.  Even fabric on the bolt has warning messages printed in the selvage (not suitable for children’s sleepwear, for example).  Warning your customer protects both of you in the long run, although it doesn’t free you completely from liability if your customer chooses to ignore the warning.

Create an LLC

An LLC (Limited Liability Company) does shield the member(s) from the liability of the company itself, much like a corporation.  LLCs differ slightly from state to state, but are an attractive option for the growing small business.  The Division of Corporations in your state will have step by step instructions on how to file for this status.  There is a fee attached to the initial filing and in many (if not most) states a renewal fee each year.  Becoming an LLC does have tax ramifications, too, although not devastatingly difficult if you are a sole proprietorship now (a single owner).  Before taking the plunge and becoming an LLC, do enough research on your own to determine if this would be a good move for you.

Due Diligence

Thinking things through during the creation process will help protect you in the long run.  You know better than anyone else what could go wrong with your pieces.  If you notice something that could become a liability or hazard, don’t ignore it – no one will notice that but me could come back to bite you down the road.  Something carefully constructed is safer than something that is not.

Conclusion

There are probably a lot of ways to protect yourself that I haven’t mentioned here.  Please share your observations in the comments section so that we can all be less at risk.

Written By iKnitQuiltSew

 

Tags: Handmade, Handmade Artists, handmade business, hazard, insurance, liability, online business, protection, risk

Posted in Information, Selling Tips