If you are just starting on the road to small business success, you will likely need to re-tailor your policies numerous times over the coming months and years in order to account for changes in the nature, size, and location of your business.
Of course, obtaining the proper business insurance is only one step in the process of starting a new corporation, S Corporation, Limited Liability Company (LLC), or Sole Proprietorship. When your dream is ready to be brought to life, the first person to call is your lawyer or Certified Public Accountant (CPA). They can help you decide which form of incorporation, if any, is right for you, your business, and your tax situation; and help you file the appropriate papers with your state and with the IRS. If you are incorporating, you will need to contact your Secretary of State before filing with the Internal Revenue Service (IRS) in order to ensure that the corporate name you choose is not already in use. If it is, you must choose another corporate name. If the name you originally chose is too dear to your heart to give up, ask your lawyer about setting up a D.B.A. (Doing Business As) under your corporate name. This is also a viable option if you are taking over an existing business, since it allows you to continue operations with the business’ current identity unchanged, while keeping legal separation between old and new owners.
At this point, you should be ready to purchase your business insurance coverage. Your insurer will likely require your Employer Identification Number (EIN) to issue a policy to your business. If you are a sole proprietorship, your Social Security number will replace the EIN on the policy.
Once you have chosen a name and filed your incorporation paperwork with the IRS and your state of residence, you’ll need to obtain any permits necessary to your particular business. For example, if you are working with foodstuffs in any form, you will need to obtain certifications from your state’s Department of Health. If you are selling directly to the public, you will need to obtain a Permit to Make Sales at Retail. If you are wholesaling, you will need different certification, and you will be required to verify that your customers possess their own Permit to Make Sales at Retail. At this point, you should also apply for any applicable city or town licenses. This process may take several weeks, especially if the licenses must be brought before the town council for approval. Many permit applications will also require you to provide proof of business insurance coverage. If your hardcopy policy has not yet reached you, your insurer or insurance agent can likely fax or email a letter of certification to the appropriate parties until your hardcopy policy arrives.
If you are applying for a small business loan, it will benefit you to have all of your permits, insurances, and tax information in place upon commencing the application process. Lenders like to see a well-laid out foundation for a startup business, and a comprehensive business insurance plan is a vital part of that. Although business insurance cannot be considered as collateral for the repayment of the loan, lenders will be reassured to see that an applicant is properly insured.