1-2-3: 3 Tips to Protect Your Small Business During a Crisis
PRIME INFOTECH 16th March 2021 92Category: Services.(0)

1 Challenge

  • “How can I protect my business during a crisis? I’m worried!”

2 Questions

  • “Is it even possible to continue my business after a crisis, or should I just give up?”
  • “What steps should I take?”

3 Ideas

It’s never easy to establish, manage or grow a small business. But in a Coronavirus-hit world, small businesses are finding it especially difficult to even survive, much less thrive. Between July and September 2020, India’s economy shrank by 7.5% compared to the same period last year – solidifying the country’s position as one of the world’s worst-performing major economies. Small businesses are especially affected by the pandemic that has led to India’s most severe recession since 1996.

In a post-COVID world, business growth may not be possible for small businesses until the worst of the pandemic is behind us. However, there are things they can do to at least protect themselves and increase their chances of survival in the future.

If you are a small business owner, here are 3 such ways to keep your company afloat during and after a crisis.

Idea#1: Revisit your business structure

In India, a large proportion of small businesses are either sole proprietorship or a One Person Company (OPC). Many of these companies choose one of these business structures because they are easy to set up and manage.

In the case of a sole proprietorship, a single individual handles the entire business and is the sole recipient of all profits, as well as the sole bearer of all losses. Since proprietorship does not have a “legal” existence, there are very few legal formalities to set it up, which makes this an attractive proposition for businesses where the market is limited, localized, and where customers prefer personal attention. The owner’s liability is unlimited while the risk involved is not very big.

An OPC is a type of private company that is considered a separate legal entity where the owner’s liability is limited.

Despite the apparent advantages of these business structures, small business owners should also be aware of the disadvantages – especially during a crisis. For example, in a sole proprietorship, the owner has unlimited liability, which means that his personal assets are not protected (there is no legal distinction between “private” and “business” assets). So if he is ever sued, say, by an unhappy customer, he could end up losing his savings and any other assets he personally owns.

In an Indian OPC, the liability of shareholders or directors is limited, but the drawback is that there is a limit on paid-up share capital: up to Rs. 50 lakhs or a turnover of Rs. 2 crores. For higher amounts, the OPC must be converted into a private limited company. Also, an OPC owner cannot incorporate more than one OPC, or become a nominee in more than one OPC.

Now ask yourself – will you be better off with a partnership firm or a private limited company? Think about issues like:

  • Number of owners/partners/directors/shareholders
  • Liability of each owner/partner/director/shareholder
  • Profit-sharing
  • Loss-bearing
  • Operational control
  • (future) Capital requirements

If all this sounds confusing, contact our sister firm Mytaxguru at +91 9224618250 or +91 8928000129. Our ROC experts can help!

Idea#2: Hire experts to guide you

Today, many Indian websites provide information about taxation, accounting, legal matters, etc. that are especially relevant to small businesses. However, in most cases, such a “DIY” approach to crucial business issues can cause more harm to good. There is virtually no harm in turning to these websites for information, but for decision-making purposes, consider hiring a lawyer, tax expert, and Chartered Accountant for your firm. These specialists can take care of specific tasks, provide sound advice for your unique situation or challenges, and even help you save money. With their support, you can comply with all legal and financial requirements mandated by the government of India.

If you’re not sure whom to hire, ask other entrepreneurs, small business owners, and startups for recommendations on professionals who are familiar with small business requirements, practices, and legal issues. Compare these recommendations and then schedule meetings with each professional before hiring. If you are on a tight budget (and can’t afford a retainer fee), talk to them about payment options that suit them as well as you. Many companies hire these experts on a “retainer” basis. Check if this payment structure works for you.

Idea#3: Protect your business, assets, and people

To protect your business during uncertain and risky times, it’s a good idea to buy business liability insurance. This insurance provides coverage to help you, your employees, and your customers in case of an accident. You should also consider buying other types of insurance such as commercial property insurance to protect your company’s physical assets like building, furniture, equipment, and inventory; commercial auto insurance to cover your business (and employees) from damages and accidents that may be caused by vehicle-related operations; crime insurance that protects your business from theft, forgery and other crime-related losses; as well as equipment breakdown insurance that can help your business recover from the costs incurred by computer, electrical and mechanical equipment breakdowns.

Other types of insurance that Indian small businesses are increasingly getting include:

  • Business Owners’ Policy (BOP): Usually a customized plan that combines different kinds of insurances like property, liability, and crime coverage
  • Business income insurance: So you can pay bills and cover other costs if you have to temporarily shut down your business
  • Commercial umbrella insurance: Extra protection and coverage that goes beyond your standard liability policy (check coverage terms and conditions)
  • Business interruption insurance: It reimburses you for lost income (or a part of it), and helps you keep your business stay afloat (at least temporarily)
  • Accounts receivable insurance: If your business is unable to collect payments from customers, it can cover you against those losses

If your business relies on computer equipment and the Internet, you should also consider getting cyber insurance that can help minimize damages related to data breaches, viruses, and other kinds of cyberattacks. But in addition to insurance, you should also take other steps to protect your electronic and computer equipment, software, servers, etc. Regularly back up your enterprise data using a secure, cloud-based solution. This keeps your data safely off-site where it can’t be destroyed by a natural calamity or a man-made disaster like a virus or ransomware attack. Use only business-grade equipment that is covered by company warranties or guarantees. Protect computers with antivirus, anti-spam and anti-malware software. Install firewalls. And last but not least, train your employees in information and data security tactics, such as using strong passwords, how to recognize a phishing attack, etc.

To know more about protecting your company from common online security threats, take a look at our article Tuesday Tips 1-2-3: 3 Ways to Protect your Business From Security Threats.


Your business is your livelihood, and probably the livelihood of many others. You owe it to yourself and to them to protect it during a crisis and after. We hope these three ideas show you the way forward to keep your company going even in the face of challenges like the COVID-19 pandemic. Good luck!

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