International Business Management

Why do you need business insurance?

Anything can happen in life without notice, including in your business. As business managers, we highly recommend securing the appropriate commercial insurance coverages for your company. These include general liability, workers' compensation, equipment coverage, employer's liability, data compromise, and more. These policies cover a wide range of incidents including injury on the job, theft, accidents at shows or in studios, and issues with disgruntled employees. There are a lot of things you can and should be insured for as your business takes off! 

Depending on the size and nature of your company, the policies for these can range anywhere from a couple thousand to many thousands of dollars. Some new clients are intimidated by the thought of commercial insurance and the costs associated with it. We suggest starting with the basics, at the very least -- general liability and workman's compensation. These two policies will usually cover incidents that happen on the road, at home, and in your office or studio. 

We would always place these coverages in hopes of never using them, but I was swiftly reminded that anything could happen when I read an article today in The Hollywood Reporter about a crew member on the set of Motley Crüe's documentary set in New Orleans. The rigger was struck by some sort of electrical accident and has been hospitalised. Thankfully, we have read that the crew member will make a full recovery, but who will be responsible for his medical bills? 

Answer: the employer. 

We don't work with this particular artist, but it would be likely that the crew person is either hired by the band or an affiliated production company. These companies more than likely carry worker's compensation insurance that should cover a bulk of this expense. If they didn't have this coverage, then we would suspect that all related parties will be on the hook for this incident.

Even with the medical costs covered through insurance policies, that doesn't leave everyone involved completely off the hook. In situations like these, a production company, the artist, the venue, and anyone else closely related could be pushed for damages from the rigger that was injured. In this case, the general liability insurance should kick in and shield the policy holders from a horrendous payout -- even if only partially. 

That is just one example of an everyday situation going completely awry, leaving all involved left to pay the piper. 

Moral of the story: examine your liability exposures and discuss with your business manager about securing appropriate coverages at limits that make sense for your company.

When should I incorporate?

Congratulations, you just signed your first big contract or landed your first major role! Is it time to legitimise your business in the corporate sense? Maybe.

When I am reviewing the corporate structures (or lack thereof) of new clients, the first thing I look at is liability. What exposures does the client have? What assets are at stake? 

If the liability is there and the client has substantial assets to protect, let's make a company! 

However, there are some times where I find it's best to cool our heels and see how the next phase of the business develops. In this unpredictable world, we all know that any project can be a flash in the pan. Some mature and ripen into much bigger ventures, while others fizzle out and send you back to the drawing board. Before committing yourself to more overhead than you wish to carry, I would take a step back and look at the bigger picture.

Every corporate entity set up requires its own administrative maintenance -- bookkeeping, taxes, insurances, payrolls, and more. All of this comes at its own cost. What can your business bare in the beginning? I think it's best not to get too far ahead until the horizon is clearer. 

I previously spoke briefly on this with Scion AV. You can watch a bit of it below.