Thursday, April 12, 2007

What 90% of Home Based Business Don't Know That You Should Know

What types of protection does your online or offline home-based business have...or need? More than you expect!

The types of coverage you need depends on several factors: The size of your business, how your business is organized (sole proprietorship, partnership, corporation, LLC), number of employees, type of compensation you're receiving (salary, fees, commissions), nature of business (service, product), where it is located, and your exposure to liability.

Things to ponder:

Do you have enough life insurance to protect your family, should you die prematurely? If you have a service business, your business is worth Zero when you die. For example, the spouse of a deceased doctor or lawyer can only sell the tools of the trade, not the clients (the true bread and butter of any service business). You can sell your service business prior to your death, if you can predict when that may occur. Otherwise, all service business owners should protect their families with a minimum coverage of 7X gross income.

If your goal is to have a member of your family take over your homr business at your demise, are they capable (and licensed) to do so?

Do you have disability insurance, in case you're incapable of running your enterprise because of illness or injury? This type of coverage will usually give you approximately 60% of your income, for a stipulated period of time. The benefit may be taxable or non-taxable (depending on whether or not you deducted the premium as a business expense).

More important...do you have Business Overhead Insurance? Who will cover the costs of running your online or offline home business (utilities, insurance, salaries) while you're out of commission? Disability Insurance will not cover your business overhead expenses, unless it is an add-on.

If you have partners, do you have a Buy-Sell Agreement? This will protect your interest in the business, should your partner suddenly die. Example: your partner dies...his wife claims her share of the business. Do you really want your deceased partner's relatives to take over their share of the business? This type of coverage would allow you to buy out your deceased partner's share of the business, avoiding any conflicts or interference by outside parties.

Do you have Disability Buy-Out Coverage? What would you do if a partner becomes severely disabled? Do you want to keep paying him (or her) for work he cannot do, possibly for years? After a period of time, this type of coverage would force your disabled partner to sell you his share of the business, based on a previously signed equitable agreement.

Of course, many of these situations may not occur, but it's your home business. Decide which types of coverage you deem most important...then speak to a professional who can give you the types of coverage you need to protect your enterprise.

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