📺 Stream EntrepreneurTV for Free 📺

5 Tips To Protect Your Company From Legal Liabilities Being a responsible business owner reflects on both you as a person and the business.

By Vinil Ramdev

Opinions expressed by Entrepreneur contributors are their own.

You're reading Entrepreneur India, an international franchise of Entrepreneur Media.


Owning a business means that you can open yourself up to varying types of claims from consumers and other businesses.

Ensuring that your business has the proper insurance coverage is ideal. Payouts for liability claims can bankrupt a small business if insurance coverage is not purchased.

Prevent Jeopardizing Liability Coverage

A business can lose its liability coverage. Losing coverage with one company may cause difficulties in finding a new liability business insurance provider, leaving your business without coverage and financially responsible for any valid claims made against your business.

Examples of how liability coverage can be lost:

  • Using company funds for personal expenses
  • Intentionally harming your consumers, employees or other businesses
  • Providing guarantees that are not valid
  • Non-compliance with corporate regulations

You can prevent losing liability coverage by ensuring that you are providing the services that you promise, comply with corporate regulations and maintain a safe working environment. If you require company funds for personal matters, as the business owner, it is best to have a payroll check issued to yourself. This shows it as a valid expense.

Operate as the Correct Business Entity

If you are a partnership but are listed as a limited liability company or sole proprietorship, you can jeopardize your liability insurance coverage. There are different types and levels of insurance coverage available for each business type. If you only provide a single product or service, you may not require the same coverage that a large corporation requires. It is important to work with your company attorney to ensure that your business is properly classified and has the proper liability coverage.

Protection for Personal Injury

While this may seem like common sense, some businesses do not have proper coverage for personal injury claims. If an employee, visitor or consumer is injured on your property by the fault of an employee, or other improperly maintained item the company is responsible for medical expenses and other fees. Ensure that your company's liability insurance has personal injury claim coverage. This should cover accidents that happen inside, directly outside or as a result of a company's actions.

Private Property Damage Coverage

Private property damage can occur during the delivery of goods or services to consumers and/or other businesses. This includes instances such as a vehicle accident, damaged buildings, and physical property. When driving is required for deliveries, or traveling to work-related events, accidents can happen due to an employee being distracted. It is best to train employees to focus while driving rather than answering a ringing cell phone or replying to a text message as any accident occurring from distracted driving leaves the company liable for injuries and damages.

As the business owner, you protect your company's assets by having suitable liability coverage. If it is found that a member of the company, or the company as a whole, has been negligent it must take financial responsibility for the incident. It is important to cooperate throughout the whole process as your actions as the business owner reflect on the entire company.

Retain a Business Law Attorney

A company attorney is always a necessity, regardless of the size of your business. The attorney should be with you from the pre-launch phase to help setup contracts, bank accounts, file documentation to operate and all other tasks associated with opening your business. The attorney should be contacted anytime there is a claim made against the business. The attorney should also be consulted anytime that a major change is planned for the business.

Changes include expansion, adding locations, adding products and becoming a global enterprise. The attorney's job is to advise the business owner of the proper measures to take to ensure that potential company liabilities are properly covered, that the business is operating correctly and to ensure that proper business practices are being followed.

Bottom Line

Small things like posting warning signs of wet floors, wet paint and other potential hazards is a good idea. Being a responsible business owner reflects on both you as a person and the business. It is vital that you have the necessary protections in place as you never know when an accident, natural disaster or injury could occur.

Vinil Ramdev

Entrepreneur and Business Writer

Vinil Ramdev is an entrepreneur, business writer and marketer. He graduated with a Bachelors degree in Marketing in 2004. Since then, Vinil has been involved in starting and growing several businesses predominantly in retail, marketing, media, advertising and on the internet. His skill for seeing the big picture, and identifying trends and patterns have made him a sort-after consultant for companies who want to grow their business and make their products more discoverable. 

Side Hustle

These Coworkers-Turned-Friends Started a Side Hustle on Amazon — Now It's a 'Full Hustle' Earning Over $20 Million a Year: 'Jump in With Both Feet'

Achal Patel and Russell Gong met at a large consulting firm and "bonded over a shared vision to create a mission-led company."

Business Ideas

63 Small Business Ideas to Start in 2024

We put together a list of the best, most profitable small business ideas for entrepreneurs to pursue in 2024.


5 Ways Solopreneurs Can Scale Their Business Through Collaboration

Our culture loves to perpetuate the myth that entrepreneurs must go it alone. But for many, the path to success is found in collaboration.


Want to Be More Productive? Here's How Google Executives Structure Their Schedules

These five tactics from inside Google will help you focus and protect your time.


I Quit! You Just Don't Know It Yet — How to Stop Disengagement and Ensure Your Employees Remain Vibrant and Productive

Disgruntled or disenchanted employees are giving up and doing the minimum at their jobs. Are people quiet quitting on you?


How to Harness the Power of Authentic Storytelling to Become a More Effective and Inspiring Leader

Storytelling enhances business leadership by inspiring a culture of authenticity and trust through sharing relevant personal stories.