Consulting as a business or self-employment has its pros and cons from a legal standpoint. For a single person consultancy, incorporation as a business structure and the related regulatory compliance is entirely too much. However, a sole proprietorship is a risky proposition because all the liability will have to be taken on by the consultant. For a single consultant or a small group of consultants, the best structure is a limited liability company, which protects their personal assets from liability but offers advantages like pass-thru taxation.
As detailed below, all such legal matters related to a consulting business have to be well thought out before setting up shop:
Many consultants choose to operate from home, but they still need to get all the required permits and licenses associated with a registered business in that location. It may additionally require a zoning permit to allow for a home-business. Consultants in certain professions such as insurance and accounting are required to be certified.
The business structure can minimize the liability from the business. But the business itself can transfer the risk to a third-party insurer. General liability insurance alone may not be enough for consultants. The best way to safeguard the business is to get professional liability insurance, better known as E&O (errors and omissions) coverage.
Do you have legal questions regarding consulting and business law? Our business law attorneys can help. Contact a business lawyer in your area today to learn more about how you can receive legal representation regarding consulting and your business.