The New York Times has a helpful and lengthy article, Insure This Business? Start-Ups Face Challenges with lots of stories about entrepreneurs and their needs for insurance. Not something most founders ever think about. But you should!
In the competitive start-up world, even the shrewdest entrepreneurs — with the latest and greatest gadgets — can find themselves thrown unexpectedly into legal quagmires that could derail or blow up a dream before it gets off the ground.
Sometimes it’s a simple oversight. Other times, a fresh-faced business owner tries to save a few dollars by ignoring such issues as liability, patents, copyright and taxes. But many of these business-killers are not only foreseeable, but preventable as well, experts say. And several who have paid heed have avoided potential business land mines.
But it’s not only the companies in the article that do personal training and moving household objects that need insurance.
Patent, ownership and copyright issues could also sink a company if not addressed.
Some cash-short entrepreneurs opt to skip the search for patents and trademarks to save money — and that’s a mistake, warned Allan H. Cohen, managing partner at Nixon Peabody’s Long Island law office.
He recalled one client who built a health care app, adopted a name, and then spent tens of thousands of dollars developing a logo, website and marketing materials using that name. However, when a trademark search was later conducted, the company discovered that the name was already being used by a small firm in another state.
The client, however, did not want to change the name, and is now gambling that the company will not be sued.
But company owners who want to be a huge success should pay heed, Mr. Cohen said. “They could get a cease-and-desist order and have to stop using the name or be sued,” he said.
And wait there’s more, like Directors and Officers insurance, more commonly called D & O insurance and Professional Liability Insurance, more commonly called Errors and Omissions insurance for professional service firms. So my best advice: find an insurance company that works with startups and make sure you are covered. Startups are not about taking risks, they are about minimizing and reducing risks. Insurance should be part of your risk management program. Insurance is truly a case where an ounce of prevention is worth a pound of cure.