Simple Steps You Should Take To Protect Yourself

Here’s one of the main reasons that you should hire a good attorney to assist you with starting your business. Being a business owner makes you a prime target for a lawsuit, especially in our industry.

You absolutely must take measures to protect your assets by limiting your personal liability in case you are sued. Simply filing a “Doing Business As” certificate with the county or state you are operating in will not be sufficient to protect your personal assets if you are sued in a court of law.

However, there are some very simple steps you can take to help limit your liability as a small business owner. Here are a few simple tips for reducing your liability in your martial arts school.

Tip #1: Incorporate

One of the most common methods that business owners can take to limit their personal liability is to select an appropriate business structure and form a separate business entity conforming to that business structure to conduct business under (a process commonly known as incorporation).

This entity usually takes the form of a corporation or limited liability company, but in some instances it may be a limited partnership. All three entities act to ensure that a potential plaintiff cannot come after a business owner’s personal assets in a lawsuit, but each form of business incorporation has its own benefits and drawbacks.

Tip #2: Consult an Attorney

It would be best if you spoke with your attorney and your CPA concerning the legal and tax benefits of each type of incorporation before you decide which one you will form to operate under. Incidentally, I operated my school as a Subchapter-S corporation to avoid double-taxation, and it worked out splendidly, saving us thousands of dollars a year in taxes.

In many states, you can easily file the paperwork yourself to form a corporation or LLC. My home state of Texas even has the necessary paperwork and filing instructions for do-it-yourself incorporation on the Secretary of State’s website. For a few hundred dollars, anyone can go to the site, download the documents, and form their corporation or LLC online.

(Note: If you feel uncomfortable doing this on your own, I would suggest using this service as an alternative to having an attorney file your paperwork. They specialize in getting small businesses set up as LLC’s or corporations, and will save you about half the cost of having an attorney file your incorporation for you.)

Tip #3: Liability Waivers

Another way to protect yourself is to have each person who takes lessons from you sign a “hold harmless agreement” before they ever start training; this is an agreement that is designed to establish beforehand that the client is in good health, that they understand the dangers involved in martial arts training and that they are assuming the risk of taking classes. For minors, their parents must sign a waiver before they can participate in class. (See the Appendices of “Small Dojo, BIG Profits” for an example of a hold harmless agreement/liability waiver.)

Of course, there is a great deal more to protecting your assets than just filling out some paperwork; you must also conduct your business accordingly if you expect the corporate entity to protect you should you become the target of a lawsuit. Once again, for safety’s sake it is best to speak with an attorney concerning such matters.

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