Business Management – Limiting your liability

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This is another installment of my Business Management posts, geared towards those of us who are business owners and/or consultants.

Limiting your personal liability is something that many business owners, particularly in our technology field, don’t think about often enough. It is however something we all need to consider carefully, as it can make or break our business.

As you know, my business provides 3rd party IT support services to clients. As such, me and my staff are often on-site at client’s locations or supporting systems remotely from our own office. As we all know, technology is becoming more and more an essential business tool. For many clients, a downed network is just as costly as a power outage or a complete loss of phone service. So, how does that translate to your business and your responsibility ?

First of all, you need to be clear in what your liabilities are in your Terms of Service, or Service Agreement. For example, here in an excerpt from my company’s Terms and Conditions:

8.            Indemnification: In addition to, and not in limitation of, disclaimers of liability made by Orange Technology for hardware and software damage in any other portion of this agreement, for any hardware or software failure for which a Service Call is made by the Client to Orange Technology, which failure has the effect of causing loss to any third party, whether or not by delay, loss or corruption of data, loss or benefit of any contracts, or any other loss, the Client shall indemnify, defend and hold free and harmless Orange Technology from and against any and all claims, judgments, damages, penalties, fines, costs, liabilities and losses (including, without limitation, sums paid in private rights of action or in settlement of claims, legal fees, consultant fees and expert fees) which arise during or after the Term as a result of such failure.

Secondly, depending on the work you do, how you’ve structured your business can affect your own personal liability. If you’re setup a corporation, then you personally can be a step removed to any potential liability. If you’re simply operating as a sole proprietor, or as a partnership, then you personally can be held 100% liable for actions put forth against your business. This means that you can lose your home, car, pretty much any and every asset you own.

Thirdly, you should be looking into a CGL (Commercial General Liability) insurance policy. I am absolutely NO fan of insurance companies, and you will never catch me advocating carrying more insurance than absolutely required, but a CGL policy is fairly inexpensive and will give you a big umbrella for liability coverage.

There are other methods you can utilize as well when it comes to mitigating liability risks, but I believe the ones above are the first steps anyone should take. Remember, liability isn’t something we often think about, but it can very easily ruin a business from one day to the next.

Author

Martin Lehner

Martin Lehner is an technology professional working for an IT services firm in Whitehorse, Yukon (Canada). He has been working in the technology field for over a decade. With a degree in Business Admin and numerous industry certifications, Martin leads a team of IT professionals that provide third party support for clients. Originally starting a company to offer web development services, Martin quickly realized that clients wanted the entire spectrum of technology services. When Martin is not at work (which is not often, since his company offers 24/7 support), he is busy at home spending time with his family.

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