No matter what type of business structure you choose, it pays to buy adequate insurance.

While business insurance is not generally required, it's a good idea to purchase enough insurance to cover your company's assets. Even if you form a corporation or an LLC, which shields your personal assets from business liabilities, you still risk losing your business if disaster strikes. Insurance can greatly reduce this risk. The two most common and generally useful types of business insurance policies are property insurance and liability insurance.

Property Insurance

• property fixtures, such as lighting systems or carpeting
• equipment and machinery
• office furniture
• computers and accessories (monitors, CD-ROM drives, modems, printers)
• inventory and supplies, and
• personal property that's kept at the business site.

In addition to establishing what property is covered under a property insurance policy, you'll need to understand which types of losses are covered. Most commercial property insurance policies provide either "basic," "broad" or "special" form coverage, with special form policies offering the broadest coverage and basic the narrowest.

A basic form policy commonly covers fire, explosions, storms, smoke, riots, vandalism and sprinkler leaks. A broad form policy typically adds damage from broken windows and other structural glass, falling objects and water damage to the list of covered items. (Note that theft isn't typically covered under either a basic or broad form policy, a fact that surprises many business owners.)

Special form coverage offers the widest range of protection, as it typically covers all risks (including theft), unless specifically excluded from the policy. While premiums for special form policies are more expensive, it may be worth the expense if your business faces multiple or unusual risks. Before purchasing any insurance policy, read it carefully to determine what types of damage are covered.