Guest Author Kelley Dwyer: How to Protect Your Business From Crisis Situations
As entrepreneurs, we’re facing unprecedented uncertainty and challenges. The good news? We don’t have to go it alone. Now more than ever, togetherness and collaboration are essential. Amber Gray, Founder, and CEO of Trusty Oak is collaborating with Stephanie Loayza, Founder of Exec Wranglers for The Better Together Series: Virtual Coffee Chats for Entrepreneurs.
Our fourth guest, Kelley Dwyer, of The Law Offices of Kelley Dwyer, PLLC, shared an enormous amount of wisdom with us about preparing your business and life for an unforeseen crisis.
Protecting Your Business From a Crisis
Today we’re going to talk about how to protect your business from crisis situations. Although my talk is about a timely topic—crisis and awful things that can happen—I’ll do my best to keep it as light as possible. But being a lawyer, of course, I have to start out by saying, while I am a lawyer, I am not your lawyer. A theme you’ll hear throughout my presentation is: seek out competent legal advice from your own personal lawyer.
It’s important to ensure that you have good legal advice. I recommend assembling a good team of professionals to advise you. Today, I’ll be giving you general legal information, not legal advice.
Why Lawyers Are No Fun at Parties
Let me start out by saying: lawyers are no fun at parties. There’s a reason, though. We always think of the worst-case scenario—it’s our job! Usually, I have to spend some time convincing people to think about the tragedies that can happen, but with the events that are happening in 2020, many people are more aware than ever. It’s important to talk through and plan for things that can happen to be prepared.
Lawyers are trained to see worst-case scenarios and to protect you from those things. As I say: some people see the glass half full, some people see the glass half empty, and lawyers see the glass falling off the table at a restaurant, breaking, injuring a patron, and resulting in a lawsuit. We may be no fun at parties, but we’ve got you covered.
Protecting Your Business: Establish a Business Entity
Today, I’ll be talking about basic legal advice for protecting yourself and your business as an entrepreneur.
Let’s start with the most important recommendation I could give you. Get a real business entity in place so you have some protection for your business. Unfortunately, I see a lot of people go out and get a DBA (Doing Business As) in order to keep overhead low when they’re first starting out.
However, it’s important to take the “worst-case scenario” into account when starting your business, and establishing a business entity can protect you from some of those scenarios. If you start a business as yourself, it’s called a sole proprietorship. A lot of people will start a business by filing a DBA and feel they’re completely set. They choose not to file for an LLC—Limited Liability Company—not realizing that a DBA does not afford them the same protections as an LLC.
DBAs and Sole Proprietorships
If you begin doing business as yourself, you open yourself up to significant risk. If your company gets sued, the bank account you use to pay your rent and buy your groceries is the same one that will be reachable in a lawsuit. A DBA doesn’t separate you from your business.
LLCs and PLLCs
To afford yourself more protection, you can go further and make sure your personal assets are not reachable in the case of a lawsuit. You do this by starting an entity. There are several benefits to starting an entity, but at the core, it allows you to separate business and personal assets.
By far the most popular type of entity is called an LLC—Limited Liability Company. Sometimes you’ll see PLLC, meaning a Professional Limited Liability Company.
Further Protections
Some people assume lawyers just want to make the most money out of each interaction, and that’s why we say to check in with your lawyer before making big decisions. But the reality is if the worst happens or you get sued, you’ll be in a much better position if you’ve worked with a lawyer on the formation of your business.
It is in your interest to at least consult a lawyer to further protect yourself and your business. If you get sued with an LLC, you can only be sued up to your level of contribution to the entity, and that money is separate from your personal assets, the money you use for things like mortgage payments and groceries. The bottom line is, business formation is not something to DIY. Consult professionals, talk to an attorney, talk to a CPA, and then decide how to move forward. These days, most lawyers will offer a free consultation. Don’t think because you’ve read a few things on the internet (this included!) that you’re protected. Instead, work with a lawyer and take careful steps.
Protect Your Business With Business Insurance
The next thing I want to talk about in protecting your business is insurance. Insurance is hugely important. A lot of the kinds of insurance that people never used to talk about are becoming very timely right now. Let’s talk about a few of them.
Business Interruption Insurance
You may never have even heard of this type of insurance, but Business Interruption Insurance is an increasingly popular topic. Before the Covid-19 emergency, business interruptions were usually due to things along the lines of black mold or unforeseen disasters. Imagine, for instance, that your business is in an old building downtown and you suddenly discover there’s black mold in your walls. You can’t serve sandwiches without remediation, of course, and have to close. Business Interruption Insurance can help with unforeseen things like that.
General Liability Insurance
A more common insurance type is General Liability Insurance, and everybody should have this type of insurance for their business. Now is a good time to review your policy and look at your insurance coverage and see what your business is protected from.
Humans Run Businesses and Humans Are Vulnerable
Finally, let’s round out our discussion of protecting your business by acknowledging the obvious: humans are vulnerable. We’re reminded about that often in the news and when crises hit: people die, unfortunately, and tragedies of all kinds happen. The owner of a business could die, or your business partner could die.
As lawyers, we think about the D’s:
- Death
- Divorce
- Disability
- Dissolution
- Disagreement
And what I jokingly call “dismemberment”—referring to when members of an LLC want to end their partnership or “dismember.”
If you work with your trusted legal counsel, you can be sure your business is protected from disasters, tragedies, and hiccups that are part of life.
