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Legal Assessment

In making a legal assessment of your business idea, you need to determine to what extent the operation of your business might expose you to legal liability. Discuss the potential risks with your lawyer. If you don't have a lawyer, it's time to find one.

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If all you want is an overview of the types of liabilities your business may be exposed to, ask your insurance agent rather than your lawyer. Your insurance agent will have a good idea of the overall picture — and, unlike the visit to the lawyer, it's free.

Of course, this tip applies only to an overview of your liabilities. If you need legal advice (for example, if you need an assessment of the odds that a suit will be filed against you), you should consult your lawyer.

Once you determine the risks, there are, of course, steps that you can take to protect yourself. One way is by purchasing insurance. For a complete discussion of how to purchase business insurance to protect yourself adequately, see the business insurance discussion.

Another way to protect yourself is by incorporating your business so that the risks will be borne by the company and not by you. But corporations may not be for everyone because they can be expensive to create ($400-$500 if you do it yourself vs. $1,000-$5,000 if a lawyer does it for you) and a lot of trouble to maintain. Note, however, that there are a number of low cost alternatives that have brought the price down and made it easy to form a business entity.