Auto Insurance Rates Affect Your Business

You may have noticed your car insurance rates go up at your last renewal, even if you’ve had no new accidents or tickets.

If your rates haven’t gone up yet, brace yourself: Car insurance companies have been losing money recently, and many will have to raise premiums to remain profitable.

Car insurance rates typically go up about three percent or four percent every year, according to the Consumer Price Index. But in December 2016, they were up seven percent from the previous December. Because the industry is expected to lose even more money this year due to more claims — and more expensive claims — we can expect insurers to kick up their rates even more. Here are some causes behind the bigger bills.

Why Car Insurance Rates Are Going Up

Problem No. 1:  More People have Jobs

A better job market isn’t helping insurance rates. Unemployment has dropped from 10% in October 2009 to 4.3% in July 2017.

With more people employed, “We see more people on the roads, more people commuting,” says Janet Ruiz, the Insurance Information Institute’s California representative. That means more accidents, she says.

Problem No. 2: Fewer People Looking at the Road

Most of us have been distracted by a cell phone behind the wheel. A recent NerdWallet study found that 67 percent of Americans surveyed who had driven in the past 12 months had used a cell phone while driving during that time.

Cell phones aren’t the only distraction on the road. The problem “is a combination of so many things,” Ruiz says. People are still distracted by the same things they always were behind the wheel — grooming, eating, children in the back seat and so on.

Distraction played a role in 14 percent of all police-reported motor vehicle traffic crashes in 2015,  according to the Transportation Department.

Problem No. 3: Claims are Getting More Expensive

State Farm, the largest auto insurer in the U.S., has seen a continual rise in claims costs due to more expensive vehicle repairs and rising medical costs in recent years, says Sevag Sarkissian, a State Farm spokesman. Many insurers are seeing the same trend.

  • Medical bills: You might not think of medical bills as a big contributor to car insurance premiums, but auto insurers, not health insurers, often end up paying for medical costs due to car accidents. The cost of hospital care rose 32.5% between November 2010 and November 2016, according to the Labor Department.
  • Car technology: The safety features, cameras, sensors and computer systems now commonplace in new cars may help make drivers safer. But these sophisticated car parts are expensive to replace after accidents, Ruiz says.

The consequences: The number of crashes rose 3.8% from 2014 to 2015, the most recent year for which data are available, according to the Transportation Department. During that same time, insurers paid out $7.5 billion more in claims and expenses than they made from premiums, according to the insurance institute. And auto insurance rates were up 7.7% between June 2016 and June 2017, according to a Consumer Price Index that measured all urban consumers.

In 2017, the private passenger auto insurance industry is projected to lose $154 billion, a new record, reflecting an increase in the number and cost of claims, according to a recent report by S&P Global Market Intelligence, an industry research company.

How to Keep Your Rates Down

  • Compare insurance quotes every year and after major life changes such as moving or getting married.
  • If you drive less than 10,000 miles per year, consider a usage-based or per-mile insurance policy.
  • Take steps to improve your credit, which affects car insurance rates in all states except California, Hawaii and Massachusetts.
  • Ask your agent to do a periodic review for possible discounts.
  • Consider buying your auto and home insurance from the same company for a bundling discount.

Jump Start Your Small Business

There aren’t many entrepreneurs I know who are content to rest on their laurels.  We’re just not built that way.  We make something, and then we want to make it better, bigger.  Striving for growth is healthy and keeps us focused on innovating, creating, and improving.

Jump-Start Your Small Business

But if you’re starting out, or even if you’re established and in a rut, it can be difficult to decide how exactly to drive your growth.  What steps should you take to inject energy and vigor back into your company?  I’ve compiled four road-tested strategies for you.

1. Focus On Why

It happens all the time.  I’m talking to a business owner who wants to grow her company, but when I ask why, she looks puzzled.  Why does it matter why?  Because the specific actions you’ll take will vary depending on the outcome you’re working toward.  So if you want to grow your business because you have personal financial goals you’re looking to achieve, you might lay out one strategy.  But if you’re wanting to fund new ventures that will position you and your company as thought leaders in your industry, then you might take a whole different approach.  Examine why you want to grow.

2. Don’t Obsess Over Social Media

Don’t get me wrong … social media can be an awesome tool for building brands and communicating with customers.  But it only works if you’re actually connecting with your ideal customers.  So Facebook might be great for middle-aged folks, but if you’re targeting Millennials, Facebook’s probably a waste of time.  Find out where your customers are and how you can reach them, keeping in mind that it might not be via social media at all.

3. Specialize

Yes, it’s my mantra: The riches are in the niches.  While you might think that narrowing your focus would end up limiting your customer base, and in fact, you’d be right.  But those customers you do appeal to…they’ll be willing to shell out big bucks for a product or service that perfectly meets their specialized needs.  We pay more for specialists – whether they’re physicians, attorneys, accountants or landscapers.

4. Be Profitable

This strategy might seem obvious, but there’s a specific reason for tying growth to profitability.  Say you’ve got a brilliant idea to expand your business, but you lack the funds to implement it.  You need an investor, and what do investors want?  A sound place to put their money.  If your company’s a mess, you’re not a sound investment.  Only if you’re running a tight ship will you be able to pull in those coveted investment dollars and achieve your big-picture goals.

Gearing up your business for growth isn’t something that happens accidentally.  It requires contemplation, strategy, and plenty of old-fashioned hard work.  But if you’re willing to plan and execute, the payoff can be huge.  One thing to remember is that the best growth is sustainable growth, rather than a splashy, temporary scheme.  It ain’t easy to achieve, but it’s oh-so worth it.

Step Up and Bring In New Revenue

Every business has its ups and downs.  And there are countless ways to economize, strategize and even take out a loan in a pinch.  But you know if you put company expenses on a credit card then you’re simply deferring the pain. Borrowing money because your business isn’t profitable just isn’t workable long-term.

You need new revenue!

Additional Revenue Streams

You may think that’s easier said than done, but every one of the tactics I outline below are ones I’ve used myself to drum up new business and make my bottom line  much healthier.  You can do it too.

1. Reach Out to Other Local Entrepreneurs

We hear a lot about “shopping local,” but we all know we could do more.  One of my favorite strategies has been to look to fellow business people in my area and offer a trade — my customers for theirs.  Now I would never advocate sharing customer information without express permission, but that’s not what I’ve done.  Say your friend runs a residential cleaning biz and you own a wine shop.  You put a stack of your friend’s business cards on your counter offering a free cleaning quote, and your friend hands out your card to cleaning clients for a discount on wine.  Two local businesses work together to drum up new business and see new faces without the expense of advertising.

2. Find a New Niche

Let’s stick with the wine shop example.  Say your business is flat and you’re desperate for new customers.  Start thinking outside the typical base of customers who shop with you because you’re next to their grocery store.  What if you approached some local realtors and offered to provide welcome gifts to new homebuyers at a discounted rate?  You could tap into a huge well of easy, repeat business.  Pop into a local bridal store and see if you can capture some lucrative wedding catering business.  The key is to look for an area to distinguish yourself and become a specialist.

3. Ask Your Staff

Just because you’re the business owner that doesn’t mean you have to generate all the ideas.  You’ll never know what your staff can contribute unless you take the time to solicit and listen to their suggestions.  Inspiration can come from surprising sources.

4. Redirect Old Phone Numbers

I just love this little trick.  Get the phone numbers for businesses in your industry and area that have closed up shop, call the phone company, and have those numbers redirected to yours.  That way when someone calls their old wine shop (that they don’t realize has closed,) they get you.  When I’ve used this strategy in the past, I’ve prepared a special offer for those redirected customers to make them feel welcome and give them a reason to try me out.

5. Jack Up Your Prices

I’ve had great results when I’ve created a premium offering — a high-tier package that I offer to my very best customers.  Though consumers can be price-conscious, they also want to feel like they’re getting good value.  Giving them a top-of-the-line option can bring in new revenue.

When you’re in a cash crunch the best way to solve it is to create new revenue streams.  In addition, once you’ve resolved your temporary crisis, I advise taking a big picture look at your company and ensuring it’s running as profitably as possible so you can head off future problems.

Small Businesses and Total Solar Eclipse

The Great American Eclipse next week may be anything but great for the hundreds of small business owners across the country who could be adversely affected — especially those in the trucking industry. And that could impact yet more businesses in terms of when they can expect to receive shipments.

But the total solar eclipse on Aug. 21, which will last just two or three minutes per location, could also be worth millions in tourist dollars from Oregon to South Carolina. So small businesses along the path of the event — along a path crossing through a total of 14 states — could certainly gain as well.

However, the major rush of tourists is expected to cause big headaches for trucking companies who use the road every day. Experts are warning of closed roads, congestion on busy routes and even communication issues due to intense mobile phone usage during the event.

Impact of the Eclipse on the Trucking Industry

Trucking companies are already anticipating temporary lost revenue.

Traffic Delays Coast to Coast

One of the major issues trucking companies are worried about is traffic volume.  To start, the heavy traffic that’s expected in places on the eclipse’s path even has state officials warning about possible gas shortages. Kentucky Transportation Cabinet officials are expecting long lines at the pumps in that state as well as possible shortages during the eclipse.

Here’s how that situation might affect truckers in that state alone.  Interstate 24 and Interstate 69 are two of the major highways that run through Kentucky. Pennyrile Parkway and the U.S. 68/KY 80 corridor in the western half of the state are also important to moving goods and services.

Officials have already warned these major roads will be congested before during and after the solar eclipse. The American Transportation Research Institute reports congestion highways in the U.S. cost the trucking industry $63.4 billion two years ago.

Departments of transportation in each of the states affected by the total eclipse expect these kinds of major traffic delays.

For truckers, there are at least two states that might not be considered friendly during the eclipse. For example, Nebraska is one of two locations that will have special ordinances in place. Oversized or over-dimensional loads will not be permitted to haul through that state from sunset Aug. 18 to sunrise Aug. 22. The only way you’ll get around these temporary laws is with an overweight permit.

Oregon’s Department of Transportation has already advised companies to reschedule their delivery plans. And the possibility exists of gasoline shortages in areas where there are many people gathered and only a few filling stations.

People stopping their cars on the side of the road to watch the total eclipse will be one of the biggest safety issues for trucking companies. Oregon has taken a proactive step of informing motorists that parking on the shoulder will be still considered a illegal during the total eclipse. If they do it anyway, their cars will be  towed and they’ll be fined.

Cell Service Limited, Road Construction Stalled

Another possible issue for trucking companies involves communication. Quite often drivers will need to stay in touch with dispatch through mobile apps. This is even the way they inform their companies if a load is going to be late or they need mechanical assistance.  The kind of tracking systems these companies use are also based on satellite connections.

Reports from northern Wyoming are already warning about the possibility of cell service going down. Local companies have already made it clear they won’t boost signals during the event.

Most states in the path of the eclipse are also suspending road construction for the dates involved.

The Path of Totality

Still, the total solar eclipse on August 21 is special. According to NASA, Monday’s total solar eclipse will be the first of its kind since 1918. Research suggests 12.2 million people live in the path of the eclipse and 88 million can drive to see it in a day. The eclipse takes place during one of the most popular tourist travel months. So it could translate into lots of cash for small businesses along its path.

Know More About Gamification and How Can It Help My Business

Gamification is a business tool representing a whole new direction for achieving the goals you have set for your company. But small businesses have been shying away from it because of the emphasis on large, global enterprises deploying the technology. That’s too bad because gamification is a tool small businesses can easily implement to create innovative programs allowing them to compete with large brands.

So What is Gamification?

The simplest definition of gamification is:  a process for integrating game mechanics into something that already exists to motivate participation, engagement and loyalty. This can be almost anything, from your website to social media presence, day-to-day operations, customer engagement and more.

Gamification introduces game design elements into non-game applications to make them more fun and engaging. It uses competition, points, achievement, rules of play, status and self-expression to encourage actions through positive feedback.

What is Game Mechanics?

The components of a game are called game mechanics. And as it applies to gamification, the right set of game mechanics are used to engage or motivate the user.

The following 10 game mechanics are used in gamification for applications in different combinations to accomplish the desired goal. They are:

  • Fast Feedback
  • Transparency
  • Goals
  • Badges
  • Leveling Up
  • Onboarding
  • Competition
  • Collaboration
  • Community
  • Points

What Gamification is Not

Gamification is not the creation of games for business application.  According to Bunchball, a leader in gamification solutions, it is “About amplifying the effect of an existing, core experience by applying the motivational techniques that make games so engaging.”

Gamification Solutions

Founded by Rajat Paharia in 2007, today Bunchball supplies solutions for companies including Warner Bro., EA, Adobe, SAP, T-Mobile and many more. But its services it offers can also be used by small businesses.

Some of the other companies providing gamification solutions are: MLevel, LevelEleven, Badgeville, and Intuitive. There are vendors specializing in different segments, including sales, education and customer loyalty.

Most of these companies and others have a free trial period with limited features. If you want a free solution you can also try OpenBadges. Developed by Mozilla, it is an open source platform for creating and issuing badges to your employees after they go through a training or achieve a milestone.

Examples of Gamification

Samsung Nation is another example of gamification. The company rewards its users with badges as they progress through different levels of achievement. The badges and levels are given after users create content, watch videos, review products, engage with their community and other activities.

Again while Samsung is a large enterprise, it is important to note the vast majority of these solutions can be applied by a small business. This is because users are interacting with the same technology — a smartphone, tablet or PC. It doesn’t matter how large your company is. Gamification can work both as a way to improve your team and engage potential customers

What is more, many small businesses are already using different aspects of gamification, without knowing it. If you give a coupon for an email address and have loyalty cards, those are forms of gamification.

How can Gamification Help Small Businesses?

Gamification delivers proven and tangible results, which can be measured with the analytics tools most vendors provide. This one is from Bunchball.

Businesses have experienced an increase in engagement across social media, both internally and externally. This includes things like more website traffic, lower times for adoption and conversions from free trial to purchase, and reduction in onboarding time.

However, there is also a downside if not managed properly. Gamification creates high-levels of expectation, which can be responsible for a false set of incentives. Additionally, gamification should compliment any other systems you have in place and not replace it. And last but not least, the motivation has to be more than money. This is especially true for millennials, who have different sets of motivation than previous generations.

Conclusion

In order for a gamification solution to be successful, it has to be well designed, executed and maintained. The methods have to be varied, and the information it provides has to be used to improve not only your business, but the application itself. Gamification is not a panacea that will magically make everything better. But it has proven tools for improving the engagement level of employees and customers can also be fun and engaging.

Increase Your Chances of Entrepreneurial Success

Being a successful entrepreneur takes more than just a great business plan. You have to build great habits, stay inspired and use the best strategies for your business idea. For more on how you can increase your chances of small business success, take a look at these tips from members of the online small business community.

Build Successful Habits

If you want to be successful, you need to build the right habits and routines. And it can help to consider the routines of others who have found success. This post by Dipti Parmar of E2M Solutions features an interview with Small Business Trends CEO Anita Campbell, including some of her work habits and routines.

Get Inspired with These Small Business Quotes

Every entrepreneur at some point could use an extra dose of inspiration. And sometimes, that inspiration can come from unlikely sources, including Olympic athletes. This CorpNet post by Marc Prosser includessome quotes from Olympians that can also apply to small businesses and entrepreneurs.

Don’t Let Your Content Bore People

Your content marketing isn’t likely to help your business succeed if people find it boring. But if you check out this post by Andrew Warner on Jeffbullas.com, you can learn some tell-tale signs to help you identify boring content. You can also see conversation surrounding the post over on BizSugar.

Make SEO Lemonade

Being successful in business is often about taking the opportunities that come your way. And the same can be said for SEO. In this Search Engine Journal post, Loren Baker outlines some ways you can make the most of missed SEO opportunities.

Find the Best Project Management Software for Your Business

Businesses that are able to increase productivity are often those that find success quickly. And project management tools like Asana and Trello can help you manage your team and productivity. You can see a comparison of some of the features of each in this post by Ramon Ray of Smallbiztechnology.com.

Boost Your Bottom Line with Mobile Optimization

With an increasingly mobile base of consumers, it’s more important than ever for businesses to keep an eye on mobile conversion rates. This Marketing Land post by Ben Jacobson includes some new numbers on the importance of mobile optimization and how to make the most of it for your business.

Find the Qualities That Make a Great Entrepreneur

There are certain qualities that tend to make great entrepreneurs. And Jonathan Dyer of Dyer News listssome of them in this post. Read on as BizSugar members also discuss the post further.

Maintain Brand Consistency

Sometimes, you’ll need to try new things in your marketing or branding strategy to find what works. But consistency is also important, especially when it comes to your actual brand. Learn more about the importance of brand consistency in this Noobpreneur post by Ivan Widjaya.

Learn What Type of Blog to Start

If you’re going to use a blog as part of your marketing strategy, it’s important that you start whatever type of blog is going to be most beneficial. That could mean starting a business blog or a personal blog. Neil Patel discusses the pros and cons of both in this post.

Try These Low Cost Internet Marketing Strategies

When developing your internet marketing strategy, it’s important to consider the cost. Even if you can’t dedicate a lot of resources to your online marketing, you still have options. Pamela Swift shares some low cost strategies in this post on Getentrepreneurial.com.

How To Answering Service Puts Money Back

Answering services get dismissed by business owners due to the initial cost. Yet, partnering with one is an investment that will pay for itself repeatedly.

One huge benefit of answering services: they provide all your customers with a live person on every call. But there’s more.

Answering service agents help with tasks like event registration, order processing, and appointment scheduling.

The best part: they offer all these incredible benefits while actively saving you money in several different ways. Here are seven ways an answering service will put more money back into your pocket.

1. Drive Down (or Eliminate) Training Costs

Plenty of businesses hire a receptionist to handle the bulk of incoming calls. These employees require significant amounts of training.

This takes time out of your day, and costs a big chunk of cash— the average cost of training an employee is estimated to fall between $1200-$1800 for small businesses.

Hiring an answering service allows you to forget about the time and money you would have spent on recruiting, interviewing, and hiring a new receptionist.

2. Helps Cut Back on Customer Service Costs

Your customer service department can be downsized, as answering services handle many basic customer needs, including booking appointments, providing help desk support, and addressing customer emergencies.

As your business grows, it’s only natural that your needs for more customer service support will increase. With an answering service, your team remains the same size while meeting all your customers’ needs effortlessly.

3. 24/7 Accessibility Means No Missed Customers

Thanks to the internet and advanced in mobility, customers not only expect but demand immediacy.

Answering services provide customers with 24/7 accessibility to your business, allowing you to meet all you’re their needs at any hour.

This constant accessibility means that you’ll never miss a single phone call. You’ll be more likely to get business from new clients, and to improve your client retention rates.

4. You’ll Out-Perform Your Competition

The professionalism a high-quality answering service gives your business will make your business stand out, earning you more business.

Answering services don’t only take messages, after all; they process orders and collect lead information. Here’s another fun fact: answering services answer calls fast.

And when we say fast, we mean it: 90 percent of calls that come in to PATLive are answered in 20 seconds or less.

5. Never Pay Overtime or Holiday Hours

We weren’t kidding when we said “every hour of every day.” Our answering services are available to your business every second of the year, including late hours and holidays.

Not only does this mean you can give your employees time off, it means you never have to worry about paying time and a half for overtime or holiday pay—at least not for keeping someone in the office to answer calls.

Answering services take care of that for you, at no added expense.

6. Reduces Technology & Equipment Costs

When you outsource your incoming calls to answering services, you significantly reduce technology and equipment costs.

This means you won’t have to pay for new phone systems, or systems to store, log, and distribute messages to your team.

Great answering services integrate with the business tools and software you already use, like your favorite CRM or payment processing software.

7. Improve Employee Productivity

How many times are you interrupted by questions that customers could find on your website, like your return policies or basic product questions?

When our workflow is jarred, it can take an average of 23 minutes and 15 seconds to get back into the swing of things.

Answering services buffer your calls, passing someone along to you only when it’s necessary, reducing interruptions for your team during the workday while improving your focus and productivity.

Finding the Right Answering Service for You

Before you invest in an answering service, you need to find the right one for your business. The best features that all quality answering services should include are:

  • Customization. The best answering services offer custom scripts to ensure that their agents are always representing your brand and your business seamlessly.
  • Integration with the software of your choice. Look for an answering service that integrates with the tools and software that you’re already using; it will save you money, and you won’t have to learn anything new.
  • Expansive services. The more services and features an answering service offers, the better. Can they transfer calls to your employees, relay messages, process orders, and schedule appointments? Will they capture lead or caller information for you? The more your answering service can do, the more they’ll help you.
  • Extremely responsive. Look for a service that values fast answering times to ensure that your business never misses a call—or a potential customer. The service you hire should site specific data about their answering time policies.
  • Script consultants on staff. The best answering services have script consultants on hand to help you create the perfect call script that will elevate your business to its optimum potential.
  • Easy setup. We pride ourselves on making the process virtually painless; in many cases, we start answering calls within 24 hours of a signed contract.

Increase Employee Productivity With Office Lights

We know that the office environment has a substantial impact on employee productivity. In preceding years, trends in office design have come and gone. We went from cubicles to open office floor plans to the more recent open-but-not-too-open philosophy.

Numerous factors impact our creativity, happiness, and productivity. That is why companies work to manicure their offices to elicit the best out of their teams. From ping pong tables to quiet rooms, there is no expense too big to move the needle on performance.

The Connection Between Office Lighting and Productivity

Recent studies have revealed a significant connection between office lighting and productivity. The American Society of Interior Design found that 68 percent of employees are discontent with the lighting in their offices. That is an important statistic to keep in mind, because an even larger number may not even be aware that the light in their offices is impacting them in any way.

But the connection between lighting and depression, lighting and creativity, and lighting and overall productivity is significant.

“The sterile, bright office lights that are so common in the corporate world are terrible for mental health,” asserts Guillaume Vidal, CEO of Green Creative. “The degree to which you can fabricate natural light in an office is invaluable. It can transform the workplace from a cold, unnatural place, to a warm, inviting space for creativity and collaboration.”

These are three things business owners need to know about office lighting:

Manage Stress

Stress is an intractable problem in every company. The good news is, the human body naturally copes with stress by emitting cortisol, sometimes called the ‘stress hormone’. When circumstances pressure the mind into difficult decisions and panic begins to set in, cortisol rushes to the rescue and normalizes our responses.

The problem is, artificial light reduces our cortisol levels. Suddenly narratives from the movie Office Spacebegin to make more sense. When we are deprived of our natural cure for stress, we act erratically. There are tens of thousands of offices that are all but designed to damage our stress management just by virtue of their lighting.

“New technology in lighting is completely changing the office environment to be less stress inducing,” says Cole Zucker, co-CEO at Green Creative. “Now there are panels that include glare control diffusers, which make light soft and natural.”

Boost Productivity

It goes without saying that harsh, bright lights damage productivity by making us depressed and stressed out. But science suggests that there is a type of light that boosts our productivity, and that is cool light.

Light is measured in Kelvins, and what we are calling cool light can be anywhere between 4,000K to 7,000K. For perspective, a campfire might be around 2,000K.

But control also matters. Many companies are creating personalized controls for each employee. That means that those who like brighter light can get their work done in an environment more conducive to their own productivity without forcing their neighbor to endure the same experience. Customization is key.

Be More Alert

Of course we know light has had a profound impact on human evolution. We do not have good eyesight in the dark and as a result many of our customs and evolved behaviors are impacted by the changing of day to night and night to day. Investigating your office environment to ensure you are not accidentally putting your employees to sleep is important.

“There is a strong link between light and circadian rhythms, sometimes called our ‘built-in-clocks’,” says Vidal. “Triggers in our environment can cause us to fall out of step with our built-in-clocks that tell us to wake up at 6 a.m. and go to bed at 10 p.m. Office lighting that does not mimic natural light properly can have your employees falling asleep at two in the afternoon without any warning.”

When your whole team is alert, fewer mistakes are made, more work gets done, and everyone is more creative. All of that is the outcome of better lighting.

Small businesses employ the largest percentage of American workers and command the largest number of offices. It is important to invest in small innovations in order to keep the workforce healthy and productive. Founders and executives who are looking for investments they can make this year to enhance their teams should look outside the box for solutions.

Choose the Best Legal Structure for Your Business

The legal structure you choose for your business is one of the most important decisions you will make in the startup process. There are four basic types of business entities, each of which has its own pros and cons.

Your choice of structure can greatly affect the way you run your business, impacting everything from liability and taxes, to control over the company. The key is to figure out which type of entity gives your business the most advantages when it comes to helping you to achieve your organizational and personal financial goals.

Types of business entities

1. Sole proprietorship

This is the simplest form of business entity, and it is used by more than 70 percent of businesses in the United States, according to the Small Business Administration. With sole proprietorship, one person is responsible for all of a company’s profits and debts.

2. Partnership

This entity is owned by two or more individuals. There are two types: general partnerships, where all is shared equally; and limited partnerships, where only one partner has control of its operation, while the other person or persons simply contribute to and receive only part of the profit. Partnerships carry a dual status as a sole proprietorship or limited liability partnership (LLP), depending on the entity’s funding and liability structure.

3. Limited liability company (LLC)

A limited liability company is a hybrid structure that allows owners, partners or shareholders to limit their personal liabilities while enjoying the tax and flexibility benefits of a partnership. Under an LLC, members are protected from personal liability for the debts of the business, as long as it cannot be proven that they have acted in an illegal, unethical or irresponsible manner in carrying out the activities of the business.

4. Corporation

The law regards a corporation as an entity that is separate from its owners. It has its own legal rights, independent of its owners — it can sue, be sued, own and sell property, and sell the rights of ownership in the form of stocks.

There are several different types of corporations, including C corporations, S corporations and B corporations. However, many people fail to consider the differences between them. For instance, while S and B corporations provide certain tax advantages over C corporations, there are certain eligibility requirements that your company must meet.

“A common misconception is that all types of corporations are the same,” said Jennifer Friedman, CMO of the small business segment of Wolters Kluwer’s BizFilings and CT Corporation. “A C corporation is different from an S corporation, but most people don’t even know that there are different types until they start doing research.”

Factors to consider

For new businesses that could fall into two or more of these categories, it’s not always easy to decide which one to choose. You need to consider your startup’s financial needs, risk and the ability to grow. It can be difficult to switch your legal structure after you’ve registered your business, so choosing correctly at the start is crucial.

Complexity

In regard to startup and operational complexity, there is nothing simpler than a sole proprietorship. You simply register your name, start doing business, report the profits and pay taxes on it as personal income. However, it can be difficult to procure outside funding. Partnerships, on the other hand, require a signed agreement to define roles and percentages of profits. Corporations and LLCs have various reporting requirements with the state and federal governments.

Liability

A corporation carries the least amount of personal liability, since the law holds that it is its own entity. This means that creditors and customers can sue the corporation, but they cannot gain access to any personal assets of the officers or shareholders. An LLC offers the same protection, but with the tax benefits of a sole proprietorship. Partnerships share the liability between the partners as defined by their partnership agreement.

Taxes

An owner of an LLC will pay taxes, just as a sole proprietor does — all profit is considered to be personal income and is taxed accordingly at the end of the year.

“As a small business owner, you want to avoid double taxation in the early stages,” Friedman told Business News Daily. “The LLC structure prevents that, and makes sure you’re not taxed as a company and as an individual.”

Partners in a partnership also claim their share of the profits as personal income. Your accountant may suggest quarterly or biannual advance payments to minimize the end effect on your return.

A corporation files its own tax return each year, paying tax on profits after expenses, including payroll. If you pay yourself from the corporation, you will pay personal taxes — such as Social Security and Medicare — on your personal return for what you were paid throughout the year.

Control

If it is important for you to have sole or primary control of the business and its activities, a sole proprietorship or an LLC might be the best choice for you. You can negotiate such control in a partnership agreement as well.

A corporation is constructed to have a board of directors that makes the major decisions that guide the company. A single person can control a corporation, especially at its inception; but as it grows, so does the need to operate it as a board-directed entity. Even as a small corporation, the rules intended for larger organizations — such as keeping board-of-directors notes of every major decision that affects the company — still apply.

Capital investment

If you need to obtain outside funding sources — like investor or venture capital, bank loans and other avenues for money — you may be better off establishing a corporation, which has an easier time of obtaining outside funding than does a sole proprietorship. Corporations can sell shares of stock, securing additional funding for growth, while sole proprietors can only obtain funds through their personal accounts, using their personal credit or taking on partners. An LLC can face similar struggles, although, as its own entity, it is not always necessary for the owner to use his or her personal credit or assets.

Licenses, permits and regulations

To operate legally, every business must be licensed. Depending on the type of business and its activities, it may need to be licensed at the local, state and federal levels. In addition to ensuring that your business entity is legally registered, you may need specific permits.

“States have different requirements for different business structures,” Friedman said. “Depending on where you set up, there could be different requirements at the municipal level as well. As you choose your structure, understand the state and industry you’re in. It’s not a ‘one size fits all,’ and businesses may not be aware of what’s applicable to them.”

It’s important to note that the structures discussed here only apply to for-profit businesses. If you’ve done your research and you’re still unsure about which business structure is right for you, Friedman advised speaking with a specialist in business law.

All About Small Business Insurance

If you’re starting your first business, you likely have a plan for financing, marketing, sales, etc. But it’s also critical to make sure you’re guarded against common business risks – and that starts with securing a business insurance policy.

The right small business insurance package is essential to your company’s long-term success. Having coverage helps protect your hard work and investment in your business if something unforeseen occurs. By purchasing insurance, you can keep your business running in spite of those challenges and circumstances.

“Defending a lawsuit can be crippling,” said Kevin Kerridge, executive vice president of small business at Hiscox USA. “A small business can attract a lawsuit, even if they haven’t made a mistake or done anything wrong. Just an allegation likely will trigger a costly defense. So new businesses often buy insurance to protect their investment – and hopes and dreams.”

Assessing your risks

An insurance agent can evaluate your potential needs and risk, and come up with a plan to fit your business, said Jeremy Haldeman, an agent with American Family Insurance. To accomplish that, the agent will work with you to perform a risk management assessment, which will give you a list of potential events that could lead to a loss, determine the estimated cost of such a loss and tell you how best to address each risk.

The goal is for the agent to gain a good understanding of the business and use this to identify potential risks to the customer, Haldeman said. This analysis can include an evaluation of possible property losses, business interruption losses, liability losses, key person losses, automobile losses and injury to employees.

Sharing specific details of your business purpose and location can aid your agent in suggesting the best coverages and the level of risk that you may incur. For example, consider a doctor or lawyer who has an office in a building owned by someone else, no inventory and office equipment that isn’t worth a lot. In this case, liability insurance is probably not as important as malpractice insurance.

For a new business considering their first insurance policy, it’s wise to consider a provider that is specifically interested in small businesses, said Kerridge.

“There are a number of online providers [that] now specialize in small businesses with impressive online service and products that are geared to small business in terms of their price points and stripping away unnecessarily complex jargon,” he told Business News Daily. “Quotes can often be obtained in minutes online, against days for more traditional methods.”

Types of insurance

While many types of business insurance are optional, there are a few instances in which a small business is obligated to have a policy.

“Obligations can stem from legal requirements, such as auto liability or workers’ compensation, or from a landlord or client who requires the business to have insurance under their lease or services contract,” Kerridge said.

If you’re looking into other types of coverage to you better manage your risks, Kerridge noted that a commercial general liability (CGL) policy covers, among others things, claims and lawsuits by others who were injured or whose property was damaged by the policyholder. Of course, not all claims are covered, and Kerridge recommended owners seek insurance advice either online or from a licensed producer.

“Some insurers, like Hiscox, also may offer some coverage for loss or damage to the business’s own property,” he said. “For a business providing professional services, like a consultant, professional liability insurance covers accusations from a client about mistakes or negligence in providing services.”

While property losses due to a fire, for example, are covered by property insurance, this same insurance typically doesn’t provide money for indirect losses, such as those encountered while a business is down for repairs. A separate insurance, called business interruption insurance, covers those losses. This covers the loss of income when day-to-day operations are affected and revenue is lost due to a closure. The key is to select the right coverages that could impact your business the most, Haldeman said.

Protection of financial loss due to the death or illness of a key business member is important for all businesses, but even more so for small businesses that typically operate with few employees. This protection is provided by business life insurance. Often found in multiple owner businesses or partnerships, this insurance provides compensation for the time or loss of work due to a key member’s prolonged absence or death as well as provides an avenue for the purchase of the key member’s portion of the business.

As a business grows, businesses typically purchase other products, such as cyber insurance, umbrella, crime and fidelity protection, said Kerridge.

“Again, when thinking about these insurance products, it’s always worth seeking the advice of a good commercial insurance professional to explain what is covered so that a cost-benefit assessment can be considered,” he added.