Understanding the Liability you take on as part of a project, or as your business as a whole, is one of the Master Keys on the Business Key Ring.
li·a·bil·i·ty
/ˌlīəˈbilədē/
noun
1.
the state of being responsible for something, especially by law.
“the partners accept unlimited liability for any risks they undertake”
Liability is something that consumers are absolutely inundated with, specifically, warning labels and liability waivers. We often see signs and warnings that seem ‘dumb’ or ‘silly’, but someone somewhere caused trouble for that company, and as a result, they had to create and post a warning, all to limit their liability.
Another view of Liability is what you are taking on as a business owner, providing products or services to your clients or customers. This is why we have business structures such as Sole Proprietorship, Limited Liability Company, Limited Liability Partnership, and others.
Think of liability as something a customer or client could sue you for later. If your service is something that could easily cause loss of life or limb, such as a doctor performing surgery, a nurse providing care, or a paramedic providing live saving actions, these are all things that could put the provider at great risk of liability.
In all cases, there are different layers of security or protection from Liability; Insurance is one of them, laws or legal protection is another, and corporate structure is yet another; some businesses employ none, some, or even all of these layers to protect themselves.
So how do you know what you need?
Best practice here is to consult an attorney and an expert in your field, which may be the same person, to review your service offerings.
Your insurance carrier will dig very deeply into this, but don’t rely on them to give you an accurate liability picture, they’re looking to make money, not help you out.
First, clearly define what you offer, do, or perform. In my case, I offer writing, and a wide range of Digital Services; I’ll write content, create business cards, websites, and other marketing materials, or sometimes I help with the finding and capturing of names and social media handles. This is a low liability practice because I’m not likely to cause any loss of life, limb, property, or even costs.
Second, figure out how dangerous this could be to the client. Some examples:
A chimney sweeper could cause a house fire, which could lead to loss of life. High liability.
An electrician could miswire something, causing a fire, which could lead to loss of life. High liability.
A plumber could fail to set a pipe or joint properly, causing a clog that backs up a drain, or a leak in a supply line, either of which could flood the house. High liability.
A mechanic could fail to install the brake pads on your car, causing a crash. High liability.
A construction inspector could miss something in an inspection, leading to something missing, or something improperly built. This brings a range of liability; it could just be extra time and labor to fix the thing, or it could be a failed city inspection, causing project delays.
A writer could write a services list that includes services you don’t actually offer, leading you to have to turn customers away. A hassle for sure, but a low liability.
Third, sort out the best ways to limit or remove your liability. This could be by understanding and relying on the laws around the practice (See: Good Samaritan Law), by purchasing an insurance policy to cover any losses, by having documentation in place to limit, offset, or displace the liability (all business deals should be done IN WRITING!), by structuring the company in such a way as to limit liability, or some combination of those.
The only way to limit your liability is to understand it, so be sure to do the research and make sure you’re properly covered BEFORE something goes wrong!