“Go start a business!” they said.
“It’ll be fun and you’ll make a lot of money!” they said. “FLEXIBILITY!” “BE YOUR OWN BOSS.”
But then … well, you are your own boss now. And there are so. many. things. to think about beyond what you got into your business to actually do.
It’s time to put on your grown-up pants, because whether you’re newly freelancing or have a “bigger” small business in Bergen & Rockland County (i.e. you have employees, overhead, and more), there are a few essential components for which to make sure you have a plan.
Because if you don’t, you might find your business in jeopardy should things shake out in a particular way.
These are “the big six” for any small business owner, new freelancer, or participant in the growing “gig economy” to make sure they have covered…
Art Sisco’s Essentials On Small Business Insurance Coverage
“F-E-A-R has two meanings: ‘Forget Everything And Run’ or ‘Face Everything And Rise.’ The choice is yours.” – Zig Ziglar
Most freelancers, and a surprising number of small business owners, have NOT made a plan for six essential coverage needs for their business.
We can help you with some of these, but not all (for which we are glad to give a recommendation) … but they are all things that require planning.
- Disability and Workers’ Comp
- Property and Liability Coverage
- Unemployment Coverage
- Healthcare Plans
- Retirement Plans (401(k)s, etc)
- Retirement Income Plan (Social Security and beyond)
I’ll take some time this week (and perhaps in a future installment or two) to cover what you need in a few of the small business coverage areas, and hopefully by the end of this series, you’ll have a plan for each (if you don’t already).
Disability — For When You Are Out of Action
Many of these issues are items that “employees” (especially of a large corporation) are covered for … but as a freelancer or small business owner, this item is regularly missed. An employee who is injured will often have Workers’ Comp to cover medical bills. And many states have a Disability Insurance structure — which will replace a portion of your wages for a short time if you are unable to work — again, if you are an employee.
But if you are working as a contractor to other businesses, or you are a business owner yourself, there is no safety net in the same way. If you’re suddenly injured, you have to have your own plan to get the work done. The good news is that you can purchase short-term disability plans (AFLAC is a common, famous example — which I’m not endorsing per se, but mentioning just because that’s what they’re known for). Many insurance companies offer these kinds of plans.
And remember there are both short-term and long-term disability plans. You should think through what it would look like if you were “out of action” in some form or fashion, and what that would mean for your business … and plan accordingly. Ideally, you should have an insurance plan for both.
Property and Liability Coverage
Again, this is something that many business owners don’t handle … often because they haven’t really been told to, or they’ve never had a problem. Many business owners are former employees, and they are used to the environment in which if they break a piece of equipment by accident, they might feel a little foolish, but no one expects them to buy a new multi-thousand dollar machine.
But if you are freelancer or small business owner and something happens to your Macbook (from which you derive all of your income), well, you are making no money until you buy another computer. And if you don’t have a spare $2K in your account, I guess that means the credit card debt, eh?
But then there are the liability issues to consider. Say you are a web designer, and you are working on a client website, and YOUR computer is logged into their back-end system, which includes customer information. You leave your laptop unattended while you go to the bathroom at a coffee shop and someone swipes it. Not only are you out a $2K computer, but you could be on the hook for any liability that comes from the identity breach you just caused.
The good news is that there is a pretty simple solution. Call your insurance provider (not the healthcare person) but a P&C — “Property and Casualty” provider — often the person who helps with your car or renters/homeowners insurance, and tell them you need a “BOP” (Business Office Policy) or a rider on your home insurance that will cover at least your equipment. And consider getting a crime or cyber security policy. A $1MM umbrella liability plan can be inexpensive (less than $100 per year), and worth having.
Again, all of these things are items that any business owner should have a plan for.
In a future installment, I’ll dive into healthcare, retirement and unemployment.
In the meantime, let us help you. That’s what we’re here for.
Feel very free to forward this article to a Bergen & Rockland County business associate or client you know who could benefit from our assistance — or simply send them our way? While these particular articles usually relate to business strategy, as you know, we specialize in tax preparation and planning for families and business owners.
Arthur Sisco, CPA PC