Cover Your A$$: Asset Protection Issues for Small Businesses. Workshop presentation by Mike Allen at the Combine 2012, Bloomington, Indiana on September 28, 2012.

1. CoverYour A$$
Friday, September 28, 12
D.MikeAllen
Attorney at Law
@dmikeallenlaw

2. Official Disclaimer
• For informational purposes only
• Not providing legal advice
• Contact your attorney for legal advice
• Not an attorney-client relationship
• Opinions are mine alone
Friday, September 28, 12

3. What do I have to lose?
Hint: everything, maybe
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4. How to not have that
happen?
Manage Risk
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5. The cure can be worse
than the disease.
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6. Get comfortable with
being uncomfortable,
but not too
comfortable or too
uncomfortable.
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7. It’s all about balance
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8. BPL Analysis
(snooze fest)
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9. B >=< P x L
Is the (B)urden greater than, equal to, or lesser than the
(P)robability of the (L)oss?
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10. Burden
The cost in $$$ or time or opportunity or whatever
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11. Probability
How likely this thing is actually going to happen?
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12. Loss
If it does go south, how much is it going to suck?
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13. Said another way...
by Ed Norton in Fight Club
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14. A new car built by my company leaves
somewhere traveling at 60 mph.The rear
differential locks up.The car crashes and
burns with everyone trapped inside.
Now, should we initiate a recall?
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15. Take the number of vehicles in the field,
A, multiply by the probable rate of
failure, B, multiply by the average out-of-
court settlement, C.
A times B times C equals X. If X is less
than the cost of a recall, we don't do one.
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16. Are there a lot of these kinds of
accidents?
You wouldn't believe.
Which car company do you work for?
A major one.
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17. This is really
how it works!!
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18. Yes.
Do it.
Low Burden < High Probability and High Loss
Low Burden < Low Probability and High Loss
Low Burden < High Probability and Low Loss
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19. Maybe.
Maybe Not.
Burden = Probability and Loss
High Burden > Low Probability and High Loss
High Burden > High Probability and Low Loss
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20. Pass.
High Burden > Low Probability and Low Loss
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21. Easy concept
Hard to implement
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22. I’m going to need help
with this
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23. Three Wise Men
• Attorney
• Insurance Agent/Broker
• Mentor
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24. Attorney
• Conditioned to spot potential risks/issues
• Usually only sees when things go wrong
• Tend to be risk-adverse
• Costs money just to talk to them
• Moderate exposure/detailed experience
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25. Insurance Agent/Broker
• Identifies risk by product line and budget
• Knowledgeable about risk vs. occurrence
• Motivated to sell you “solutions”
• Usually most exposure/experience
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26. Mentor
• Practical advice
• Variable exposure/experience
• Variable risk-tolerance, generally higher
• Can help connect with Attorney/Insurer
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27. Things to Consider
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28. Form a
limited liability entity
• Don’t care which one
• Pick your favorite
• General Partnerships don’t count
• LLC in the same State you are
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29. Pierce the
CorporateVeil
Fancy of way of saying:
“We’re coming for your ass”
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30. Corporate Formalities
• Undercapitalization
• Corporate Paperwork and Records
• Commingling Funds
• Pay Individual’s Debts
• Separation of Identity
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31. Document Things
• Protects when things go wrong
• Helps when things go right
• Does not totally lock you in
• Sometimes required
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32. Contracts
• Know what you’re signing
• Sign as a representative
• Don’t be afraid to negotiate
• “A” lawyer is not the same thing as
“YOUR” lawyer
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33. Employees
• Liability vectors
• Employment agreements
• Employee manual
• Ruthless accountability
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34. Insurance
• Various coverages and benefits
• Commercial General Liability (CGL)
• Worker’s Compensation
• Cost of defense
• Focus on your work
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35. Questions?
Hit me.
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36. D. Mike Allen
Friday, September 28, 12
Mallor | Grodner LLP
mike@lawmg.com