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Do I Need Liability Insurance?

My friend and I are trying to start a construction cleanup business. We're wondering: do we have to get liability insurance if we are the only ones working? Are there any other legal factors we should consider?

Yes, you do. Any business that deals in high-risk and related activities, such as construction, should have appropriate levels of insurance in place. Otherwise, you run a serious risk of bankruptcy -- if there’s a judgment against your company -- or worse, exposure of the owners personally.

Additionally, liability insurance may well be a requirement of any job that you work on. Be sure to speak to a commercial insurance professional to make sure you have the levels -- and different kinds of business insurance -- that you will need.

Related: Top Seven Mistakes Business Owners Make Filing Insurance Claims

As to other legal factors, you’ll want to take steps to reduce your risk exposure. These include: forming a separate business entity, having a written contract for all of your jobs and complying with any health or safety regulations that are relevant to your business. Don’t overlook codes and regulations concerning sanitation and disposing of hazardous materials.

As to the business itself, you’ll want a clear understanding with your business partner about decision-making, capital contributions and why each of you might leave the business -- which you’d address in a partnership agreement. A local attorney who understands the construction industry should be able to help you with these items.

Related: Seven Steps to Get Your Business Ready For the Big One 
 

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