Liability Risks In A Small Business

Liability is the kind of risk face in a small business because Liability is a major concern for sole proprietors; the reason is that the owner is liable personally for claims against the business. Unlike an LLC or corporation, if by any chance I find myself in a lawsuit as a sole proprietor, losses a lawsuit or otherwise find myself in debt, it’s not only the business that will be liable for the debt, but the owner which is the sole proprietor will be as well. And being a sole proprietor, one of the first steps in decreasing liability risks is to first and foremost recognize where you’re vulnerable because most often claims arises from a source that are predictable and as well from a preventable situation. Some sort of contract or agreement

I.e. if I’m accused of violating a contract or someone from the business entity does whether written or oral, that particular dispute might or eventually lead to a lawsuit. And if such Problems arise, they are known as "contract" claims, because the problem derived from a contractual agreement.

Another serious risk and Liability faced by single proprietor is that, when someone in around the business gets injured by some act that are not actually contract related, either financially or personally. For instance, if someone got injured by one of employees through negligent; definitely, my business will be held liable. This is where my risk management comes in to manage the effort in preventing these kinds of claims which is known as “TORTS” in legalese which are very costly to me as well as my business (Pakroo, n,d).

How could you address these risks by becoming incorporated?

The prolific and the most systematic way to address the risks by becoming incorporated

2nd, the C Corporation pays taxes as well whenever it pays dividends to shareholders. Numerous businesses that decide to incorporate their business always choose the form of an S corporation instead in order to avoid double taxation. Tax designation filed with the IRS using Form 2553 is the only different between a C corporation and an S corporation. An S corporation can choose to pass the income, losses, deductions and credit for the corporation through to the shareholders of the corporation for federal tax purposes according to the IRS. With this kind of method, double taxation can be avoided by an S corporation that a C corporation is subject