The term liabilities represents the state of being responsible for something. In business terms, it may be defined as the company’s obligations which arise from the previous events. Their settlement usually requires the transfer of the assets, providing services or other beneficial activity.
Characteristics
The main characteristics of liabilities are the following:
it involves any borrowed money from banks or individuals that can be returned during certain amount of time
it involves settlements which will happen in the determined date in the future and can include the use of assets, services or other transactions
it involves a responsibility towards the other company or individual without the possibility to avoid settlement
it involves obligations and transactions that already happened
Liability areas
In order to prevent being sued the company should be aware of all the liability areas that should be evaluated regularly. Those areas are related to:
employees – all of the obligations towards the employees should be complied ; those obligations can be related to insurance, tax, superannuation, health and safety etc.
accidents and injuries – this goes under the health and safety, but spreads out to non-employees; if an outsider gets hurt on the property of the company, he may want to file a complain against it
drivers – if a company driver gets in the accident, company may be liable for the consequences
products – if company produces and sells the product which later causes injury or accident, the company may get sued
errors and oversights – the company is reliable for errors that employees make, such as losing data or wrong information
board of directors – if there is such an organ within a company, they may be considered liable for all of the actions that company takes
Liability insurance
Determining the level of liability is something that every company needs to do. After all, it affects the insurance policy. Knowing the risk level and being able to prevent as many law sues as possible can help company save a lot of money. Another way to be sure that company won’t have to pay large amounts of money in case of the successful law suit is to be insured. In that case, the insurance will cover all the costs mentioned in the contract. Terms and conditions of the insurance contract should be carefully examined so the company would have the most benefit from the insurance: no more unexpected costs on the account of liability.
