What about liability insurance? That depends on your business. If you're a service provider who's unlikely to get sued no matter how poorly you perform, such as a proofreader or graphic designer, you probably don't need insurance. "We tell our bookkepers that every insurance agent will tell them they need errors and omissions insurance," says Mazzella. "But we've never heard of bookkeepers being sued unless they stole from the business or committed fraud, and no insurance will cover that."
If you sell products, you again have to evaluate your risk. "If you sell bottle corks, your liability would probably be limited to replacing bad bottle corks," says Williams. "If you mass-produce cherry jam, you have the liability caused by people getting sick on your jam or breaking their teeth on a cherry pit. You wouldn't want to self-insure that liability. You'd want product liabliity insurance."
Always use contracts, recommends Alan Siege, president and CEO of Small Business Management Consulting in Brooklyn, N.Y. "Specify clearly what the deliverables are and what and when people will pay you -- and make people acknowledge it. By having a contract, you're saying that you play for real and that you're someone whose business people need to take seriously."
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