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Before you incorporate, investigate and find out what actions can cause you to be sued. You can do this by asking others in your line of business or advisors who work with companies like yours. Then see whether you can purchase insurance to protect against these potential liabilities. Insurance is potentially superior to incorporation because it pays claims.

If you belong to a professional group(s), especially if it has a national office, the group may be able to provide information on the percentage of members who are incorporated and on legal and insurance issues. Also, insurance agents may be able to advise on their experience with claims in your specific industry.

Suppose that you perform professional services but make a major mistake that costs someone a lot of money, or worse. Even if you’re incorporated, if someone sues you and wins, your company may have to pay a sizeable settlement. This situation not only costs a great deal of money but also can sink your business. Only insurance can cover such financially destructive claims.

You can also be sued if someone slips and breaks a bone or two. To cover these types of claims, you can purchase a property or premises liability policy from an insurer.

Accountants, doctors, and a number of other professionals can buy liability insurance. A good place to start searching for liability insurance is through the associations that exist for your profession. Even if you aren’t a current member, check out the associations anyway. You may be able to access any insurance they provide without membership or you can join the association long enough to get signed up. Incorporating, however, doesn’t necessarily preclude insuring yourself. Both incorporating and covering yourself with liability insurance may make sense in your case.