Small startups in 2025 require proof of surety bonds, insurance, and a license. In certain sectors, such as real estate or financial services, an Escrow Agent Bond may also be necessary to ensure that client funds are handled properly and legally. The requirement of getting insured, obtaining a surety bond, and a license is compulsory in some industries. This requirement will help your business to grow faster and build connections.
WHAT DOES LICENSED, BONDED, AND INSURED MEAN?
If a small business has been bonded, insured, and licensed, then it can be assumed that it is protected by three different layers.
1] LICENSED: If your business is licensed, it means that you have met all the legal criteria to operate in some industry. It means that you have registered with the local authority after passing an examination.
2] INSURED: If your business is insured, then it can protect your business during the time of suffering a loss by accident or lawsuit. For instance, if you happen to get in a lawsuit and incur big losses, then the insurance company shall pay the party on behalf of your business. However, you have to pay monthly premiums to the insurance company to keep the insurance in force.
3] BONDED: A surety bond is a financial concept that provides a guarantee that you will complete your contractual obligations. A surety bond generally involves three parties, which makes it a unique agreement. You and your business shall be considered as the principal, who has to complete their obligation. Your client becomes the obligee and the surety company becomes the surety.
INSURANCE VS. BOND: WHAT IS THE DIFFERENCE?
An insurance typically involves two parties in an agreement. The policyholder and the insurance company are the two parties involved in an insurance agreement. The policyholder shall get compensation from the insurer in the event of the occurrence of any specified event. Surety bonds, on the other hand, involve three parties in an agreement. If the principal fails to fulfill his obligation, then the surety company shall compensate the obligee and later on collect the amount from the principal.
WHY BEING BONDED AND INSURED MATTERS FOR SMALL BUSINESSES
The first reason would be the trust gained by their clients when your business is covered. Being a bonded and insured business safeguards your reputation and income. It can also benefit you by making you eligible for licenses and jobs.
HOW MUCH DO BONDS AND INSURANCE COST?
The cost of getting bonded and insured depends on your financial stability and the place where you are living. As far as small businesses are concerned, the premiums may start from $42 per month to $500 per year towards general liability.
CONCLUSION
Small businesses are required to be bonded, insured, and licensed to avail favourable conditions. The cost of paying premiums is not a waste of money, as they will be a great help at the time of incurring a loss.