What if your gift basket business was affected by a flood, many of which have occurred in areas throughout the U.S.?

Would you dry out and rebuild your business, or would the weather circumstances close you for good?

I thought about this as I read the story of a gift basket designer that recently re-opened her business. Her problems arrived when a water main break in her town caused extensive water damage in her store. You can read the story here.

This is a hardship that you may believe is insurmountable, but thankfully, this designer is in business for the longhaul, and I commend her.

Such a situation makes you aware of how vitally important insurance is to your longevity. Are you fully insured? Read this insurance page on the GiftBasketBusiness.com site to learn more about what types of items in your business to consider as you either buy a policy or renew an existing one.

Look around your studio. Is your passion for gift baskets so deep that you’d rebuild and start again?

Shirley George Frazier

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My business insurance policy just added a feature that I was going to buy as part of an additional policy.

It was terrific learning that I didn’t have to open a new policy for this added protection.

What about you? Does the insurance policy that protects your gift basket business adequately cover costs for fire, theft, and other concerns?

The beginning of the new year is a good time to review your policy according to the business structure you’ve created and its insurance requirements.

Knowing that your policy covers your current structure allows you to concentrate on designing, product selection, and how to get more of your gift baskets into customers’ hands.

When do you plan to review your business insurance policy?

Shirley George Frazier

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Last week’s questions and answers with Bomba Insurance Agency helped demystify why gift basket insurance provides peace of mind for our personal and professional lives.

The last four questions continues this valuable education.

Q: Can I deduct the cost of business insurance on my income taxes?

A: Yes; this cost is part of doing business and is deductible.

Q: What else is covered in a business insurance policy?

A: There’s lots of coverage, including:

• Liability for bodily injury
• Property damage, including losses that occur after the sale (also known as product liability)
• Personal/advertising injury in case of slander or defamation of character (you are dealing with the public and false advertising claims)
• Some form of no-fault medical payment coverage
• Other types of coverage that can insure your business property, equipment, inventory, supplies, and loss of business income

Q: If I’m sued, what about attorney or lawyer costs?

A: These costs are included with the insurance policy, but it’s wise to ask your agent or company if the cost of defense is what’s known as “inside or outside of the policy limits.”

If inside the policy limits, that means they subtract the cost of defense from your insurance coverage. That’s not the best way to go, as the cost of defense is usually more than the lost, and you may run out of coverage.

Outside the policy limit coverage is best. That means all legal fees are covered with no limit, and it is not subtracted from your liability coverage.

Q: What else should I look for in an insurance policy?

A: Make sure that the insurance company is an “admitted” company to your state and that they are at least an A-rated company.

Admitted means they maintain offices in your state and therefore are usually covered by your own state’s “insurance guarantee fund” in case they become insolvent when you have a loss.

This information, as well as an insurance company’s rating, should be available from your agent and can also be checked by a reputable rating company such as A.M. Best, an independent rating company that is not funded by insurance companies.

Most importantly, ask lots of questions, and make sure you understand what you are buying. There is no such thing as a stupid question because you’re smart enough to ask!

What questions or comments do you have? I encourage you to share your feedback in the comments section below.

My thanks to Bomba Insurance Agency for their participation in this Q&A, being a partner of this blog, and sponsor of the fifth edition of How to Start a Home-Based Gift Basket Business.

Shirley George Frazier

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As a gift basket designer, your main focus is finding products, making deliveries, and earning revenue.

Business is moving along and hopefully increasing each day, but there’s also a chance that an unforeseen situation may come your way. Here are three examples.

Liabilities happen against many businesses, and because your business is food based, there’s a good chance that such a situation will occur. It’s your responsibility to make sure you are protected against these circumstances.

Insurance isn’t a glamorous topic, but it is a service that provides peace of mind while you continue to create beautiful gifts and baskets.

Many insurance carriers call gift basket coverage “crafter’s insurance,” but don’t let that arts-and-crafts name fool you. Such insurance provides you with a minimum $1 million in liability protection and other built-in coverages that let you rest comfortably at night.

Review this business insurance information page to consider your options. You want the media to talk about your gorgeous designs, not a customer seeking damages because of a tainted product.

Shirley George Frazier

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When I began my business in 1990, there was no information available anywhere on how to store gift basket products.

So, where would an aspiring designer put all of her inventory? The logical choice for me was in my home attic, as it’s big and easy to access.

The basement was also an option, and if I were in an apartment, I’d also consider turning one of the rooms into my workspace/storage facility.

If you are home based and store inventory within your premises, it’s wise to make sure that all of the contents are insured against theft, fire, or flood. Theft may not occur at home, but the latter two are possible.

Monday’s activities around my home brought the potential for fire too close for comfort. I talked about this on another blog Wednesday and decided to bring this situation here for your benefit.

A fire occurred in the house next to me. It was a tense time as the block was completely shut down to passersby while an army of firemen ended the ordeal.

My home was completely spared of damage, including trapped smoke in the halls and rooms. I cannot tell you how thankful I am that all worked out for me.

When the attic area acted as my storage facility, I estimated the inventory’s worth each year and adjusted my business insurance to cover the contents.

What about you? Is your valuable inventory covered by an insurance policy, or do you hope that what happened to me on Monday won’t occur in your area?

As you bring new baskets, foods, gifts, and supplies into your workspace for holiday orders, be sure to protect the contents against problems that may happen in your facility and situations that you have no control over on other people’s property.

You’ll learn more about your insurance options on this page.

What’s been your business experience with fire, theft, and flood?

Shirley George Frazier

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One of my good friends is a regular gift basket receiver because of the support she provides to people in her industry.

This lady recently Emailed me to ask:

“I’ve had a beautiful gift basket on my mantle for three years. Is it okay to open it now and eat the contents?”

My immediate reply was, “You can open the gift basket and begin enjoying the non-edible products, but don’t you dare eat any of the snacks.”

She Emailed me back saying that she can understand why eating any of the items now would be hazardous to her health.

She also said that she was surprised to see no labeling from the gift basket designer related to the general expiration date.

You may think that gift basket recipients, especially the ones that are adults, automatically know that anything in a gift basket not eaten within a certain period of time is no longer consumable, but they don’t know.

Long ago, I created a label placed in an area of the basket that immediately alerted receivers about the perishable items.

Last week, I talked about business insurance, and this is one of the reasons why insurance is critical to your longevity. People might eat something they’ve saved for a very long time.

What type of labeling do you add to your gift baskets to alert customers and recipients about product expiration?

Shirley George Frazier

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Why is insurance one of the most-baffling parts of your business? It’s likely due to one of these reasons.

1. I don’t know where to get insurance.

2. I don’t know how much insurance to get.

3. Do I really need insurance if I’m buying pre-packaged foods?

I’m sure insurance companies would be very pleased if, when you registered your business with the proper officials, you were also required to show proof of insurance for that business, similar to when buying a house or vehicle.

The last time I bought a car, the dealer called my insurance company as I sat at his desk for proof that I had insurance before I drove off the lot. If I was purchasing a business, chances are I could not start selling gift baskets unless I had coverage.

Hopefully, such a scenario will not become a reality, but if your business is not protected by insurance, don’t you also hope that nothing will ever happen that proves it would have been better to buy it?

Click here to read more about insurance. Then determine if it’s hope or peace of mind that will allow you to sleep at night.

Shirley George Frazier

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Remember: Enter the gift basket business contest. Get details here.

Okay, who’s running a business and not remitting state sales taxes? I just read a story about a Minnesota-based business owner who decided to keep all the money.

The story, published in StarTribune.com, uncovers more than just a home-based owner who innocently overlooked his obligation. But what’s basic to us is understanding that if you’ve registered your gift basket business in the United States:

1. Gift baskets are considered a luxury and are therefore taxed when sold to individuals or firms in your state.

For example, if a client lives in Vermont and your business operates in Vermont, the client is taxed. If a client lives in New York and your business operates in Vermont, the client is not taxed.

2. Gift basket profits and losses are entered on the Internal Revenue Service’s (IRS) Schedule C at the end of each tax year if you operate as a sole proprietorship, partnership, or limited liability corporation (LLC).

Meet with your accountant to make sure your taxes are filed using the correct documents, and believe me, Schedule C is just one of many necessary forms.

3. Gift basket state sales tax is remitted either monthly or quarterly depending on your state’s laws.

The business section on your state’s Web site provides more details on when the tax is due, and your accountant will also know.

Many states only accept electronic payments. Put the payment schedule on your calendar so that you pay on time.

If you make gift baskets outside of the U.S., a certain department within your country will provide all details on how to remit monies due.

I used to create massive spreadsheets by hand to determine my sales and taxes. Thank goodness that was long ago.

Now in QuickBooks, by clicking the Vendors — Sales Tax — Pay Sales Tax button, I instantly know my income and sales tax liability, and the online payment takes about five minutes. No more fingers and toes!

The Minnesota guy faces “up to five years in prison, up to a $10,000 fine, or both.” That’s no way to run a business.

Do you believe that one of your competitors is not paying their fair share of sales tax?

Shirley George Frazier

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