lawyers’ community educational forum for business … · 2019. 6. 21. · asset protection for...

LAWYERS’ COMMUNITYEDUCATIONAL FORUM

FOR BUSINESS OWNERS

Sponsored By:

Asset Protection for

Business Owners

SBAC Lawyers’ Educational

Forum for Business Owners

June 19, 2019

Barbara L. Yong

Golan Christie Taglia LLP

70 West Madison, Suite 1500

Chicago, Illinois 60602

312.696.2034 [email protected]

Will You Be

Singing In

The Rain?

Bio

Barbara L. Yong is a partner with the law firm of Golan Christie Taglia LLP. She has been practicing for over 35 years, the last 25 ofwhich have focused on commercial litigation, reorganization and bankruptcy. Barbara counsels individuals and businesses in financialdifficulty and represents both debtors and creditors in chapters 7, 11 and 13. She has handled both bench and jury trials in state andfederal courts and argued before the Illinois Appellate and Supreme Courts and the U.S. Circuit Courts of Appeal for the Fifth andSeventh Circuits. Her article, “Fraudulent Concealment: Silence Isn’t Always Golden” was published in the March 2012 Issue of theJournal of Corporate Renewal, Vol. 25, No. 2.

Barbara graduated from Loyola University School of Law in 1982 and received her undergraduate degree from the University of Illinoisat Urbana-Champaign in 1979 where she graduated Phi Beta Kappa. Barbara is a member of the Illinois CPA Society, the American BarAssociation, the Illinois State Bar Association, the Chicago Bar Association, the DuPage County Bar Association, the Women’s BarAssociation of Illinois, the American Bankruptcy Institute, the Turnaround Management Association and the International Women’sInsolvency and Restructuring Confederation.

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Business Ownership

– Sole proprietorship and partnership – all assets at risk

– Corporation and LLC – generally speaking, only the business is liable for business

debts

– But the corporate veil is not a brick wall and there are many exceptions.

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DEBTS – Business Owners

May Be Held Personally Liable

– Personal guaranties of business loans

– Personal guaranties of leases

– Real Property

– Personal Property

– Unpaid Sales Tax

– Unpaid Employee Withholding Tax (Trust Fund Portion)

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DEBTS – Business Owners

May Be Held Personally Liable

– Unpaid Wage Claims (including attorneys’ fees)

– Unpaid Unemployment Insurance

– Unfunded or under-funded Pension Liabilities

– Employment discrimination, sexual harassment,

retaliation

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Protecting Personal Assets

– Tenancy by the Entireties – Residence, spouse, protects against claims against

either spouse, but not against both

– Irrevocable Trusts

– Family members if transferred while solvent

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http://www.google.com/url?sa=i&rct=j&q=&esrc=s&source=images&cd=&cad=rja&uact=8&ved=0ahUKEwj0oNne9fzTAhWIJFAKHalxCv4QjRwIBw&url=http://propertydeeds.org/real-property-deed/&psig=AFQjCNGh0Uhk8rfuUEKEQwBjsfHTOB6rsg&ust=1495316320566051

State and Federal Law Exemptions

– 401(k) – Unlimited, but can’t exceed annual limit

– IRA – Up to $1,000,000

– Exception - Inherited IRAs are not protected from creditors

– Pensions and Qualified Retirement plans – Unlimited

– Contributions to 529 Education Plans – for dependents only (Unlimited)

– Life Insurance and annuities – beneficiaries must be spouse, parent or child or

other dependent. (Unlimited)

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Some Assets Can Still Be

Protected Even After a

Judgment Has Been Entered

– If still solvent, can transfer assets

– If not, you can still avail yourself of state and federal exemptions – Insurance,

401(k), IRA, 529 Plans

– You can pre-pay mortgage or rent

– You can lease or rent car

– You can pre-pay taxes

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Quoting Maya Angelou

“Hoping for the best, prepared for the worst, and unsurprised by anything in between.”

I Know Why the Caged Bird Sings

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AVOIDING DISCRIMINATION CLAIMS

ARTHUR R EHRLICHGOLDMAN & EHRLICH20 SOUTH CLARK STREETSUITE 500CHICAGO, ILLINOIS [email protected]

Arthur R Ehrlich, partner in Goldman & Ehrlich, has over 30

years of legal experience representing employees and

small businesses in Employment Law, including

Discrimination; ADA, Sexual Harassment; Wrongful

Termination; FMLA, and Negotiating Employment and

Severance Agreements. He was admitted to practice in

Illinois in 1984, and practices in state and federal court,

EEOC and the IDHR. Arthur is on the Board of Directors for

the SBAC.

EMPLOYMENT AT WILL DOCTRINE

IF THERE IS NO EMPLOYMENT CONTRACT. . .

CAN BE TERMINATED FOR ANY REASON, NO REASON

OR A BAD REASON

BUT

EMPLOYEES ARE PROTECTED AGAINST

DISCRIMINATION AND RETALIATION

I. FEDERAL AND STATE LAWS PROHIBIT DISCRIMINATION BASED ON

A. RACE

B. NATIONAL ORIGIN

C. RELIGION

D. AGE

E. DISABILITY

F. AND GENDER WHICH INCLUDES

1. SEXUAL HARASSMENT

2. PREGNANCY DISCRIMINATION

3. SEXUAL STEREOTYPING

(SEXUAL ORIENTATION, SEXUAL IDENTITY, LGBTQ)

RETALIATION

A. MAKING GOOD FAITH DISCRIMINATION COMPLAINT

B. SEEKING AN ACCOMMODATION UNDER THE ADA

C. FILING A WORKERS COMPENSATION CLAIM

D. WHISTLE BLOWING ACTIVITY MADE IN GOOD FAITH e.g.:

1. REPORTING A CRIME TO LAW ENFORCEMENT

2. COMPLAINING ABOUT UNPAID WAGES OR OVERTIME

3. REPORTING POTENTIAL SAFETY VIOLATION

BUT I HAVE NO PREJUDICES!!!

YES YOU DO

AVOIDING DISCRIMINATION OR RETALIATION

THERE IS NO LOGIC TO PREJUDICE

IT IS NOT TYPICALLY AN ALL OR NOTHING

PROPOSITION

YOUR 65 YEAR OLD EMPLOYEE WHO IS STILL SHARP

AND COMPUTER LITERATE IS WONDERFUL

BUT HOW DO YOU FEEL ABOUT THE

OTHER 65 YEAR OLD WHO HAS TROUBLE

LEARNING THE NEW COMPUTER SYSTEM

1. SUSPICIOUS STATEMENTS OR ACTS

a. “YOU DON’T FIT OUR PROFILE”

b. ASKING OLDER EMPLOYEE WHEN HE

PLANS ON RETIRING

c. “I DID NOT KNOW YOU WERE

(GAY) (PREGNANT) (MOSLEM)

FOLLOWED BY BAD PERFORMANCE REVIEW OR

FAILURE TO PROMOTE OR TERMINATION (etc) A

FEW MONTHS LATER

RED FLAGS OF DISCRIMINATION

2. TREATING SIMILARLY SITUATED EMPLOYEES OUTSIDE

PLAINTIFF’S PROTECTED CLASSIFICATION MORE FAVORABLY

IN SIMILAR SITUATIONS

DISCIPLINING THE 65 YEAR OLD MOSLEM

TEACHER FOR TARDINESS

BUT TAKING NO ACTION AGAINST THE

YOUNG AMERICAN EMPLOYEE FOR THE SAME THING

3. SUSPICIOUS TIMING

a. EMPLOYEE ASKS FOR AN ACCOMMODATION FOR A

DISABILITY OR SUFFERS A WORKERS COMP INJURY

b. THEN LAYING THE EMPLOYEE OFF A FEW MONTHS

AFTER

PERCEPTIONS VS FACTS

HIRING AND PROMOTION DECISIONS

A. EVIDENCE OF DISCRIMINATION

1. HIRING CAUCASIAN EMPLOYEE WITH SIMILAR

QUALIFICATIONS AS THE AFRICAN

AMERICAN, OR MOSLEM OR HISPANIC EMPLOYEE

IS A POTENTIAL PROBLEM

2. REJECTING ELDERLY EMPLOYEE WHO IS MORE

QUALIFIED THAN YOUNGER EMPLOYEE

IS A BIG PROBLEM

BEST 4 DEFENSES FOR EMPLOYERS

1.DOCUMENT DOCUMENT DOCUMENT

2.CONSISTENCY IN HOW ALL EMPLOYEES ARE TREATED,

ESPECIALLY AS TO DISCIPLINE

3. TALK TO YOUR ATTORNEY BEFORE YOU TERMINATE

ANYONE

AND WHENEVER YOU HAVE ANY DOUBTS

4. INVESTIGATE ANY COMPLAINTS OF DISCRIMINATION OR HARASSMENT

a. DO NOT IGNORE EMPLOYEE COMPLAINTS

b. FULLY INVESTIGATE

c. MAKE SURE YOU TRUST THE MANAGER DOING THE

INVESTIGATION

(BECAUSE EVERYONE HAS A BIAS OR PREJUDICE)

THANK YOU

ARTHUR R EHRLICHGOLDMAN & EHRLICH20 SOUTH CLARK STREETSUITE 500CHICAGO, ILLINOIS [email protected]

FOLLOW US ON TWITTER @GOLDMANEHRLICH

LIKE US ON FACEBOOK LAW OFFICES OF GOLDMAN & EHRLICH

http://www.goldmanehrlich.com/

INTELLECTUAL PROPERTY FOR SMALL BUSINESS OWNERS

DENNY ESFORD

PRESIDENT & TRIAL COUNSEL

DENNY ESFORDWINDY CITY TRIAL GROUP

Denny Esford is the President of Windy City Trial Group. For

his entire 16-year legal career, Denny has litigated

commercial disputes in state and federal court in Chicago.

The focus of his current practice is breach of contract,

business torts, trade secret, copyright and trademark

infringement claims. Prior to his legal career, Denny spent

18-years in engineering, sales and management positions

at several companies including GM and United

Technologies. He is the author of over 20 technical articles

in the field of CNC machine tools and the former Senior

Editor of Cutting Tool Engineering, an international industry

trade journal.

PATENTS

• PLUS: 20-YEAR MONOPOLY,

• MINUS: TELL EVERYONE HOW IT IS DONE

TRADE SECRETS• “STEP CHILD” OF INTELLECTUAL PROPERTY

• COMMERCIAL VALUE BY NOT BEING GENERALLY

KNOWN TO THE PUBLIC OR WITHIN AN INDUSTRY

• STATE LAW—UNIFORM TRADE SECRETS ACT (UTSA)

• FEDERAL LAW—DEFEND TRADE SECRETS ACT (2016)

• PLUS: NO TIME LIMIT ON PROTECTIONS

• MINUS: WHAT THE DOES “REASONABLE PROTECTION

UNDER THE CIRCUMSTANCES” EVEN MEAN?

• THINGS GO BETTER WITH COCA-COLA.

LEGAL CATEGORIES OF TRADEMARKS

Fanciful—Made Up Name—can seem counter-intuitive

• Kodak

Arbitrary—not a generic word association

• Apple—for computers and cell phones

Suggestive—Mental transformation required

• Citibank—urban financial services

• Coppertone—tanning lotion

Descriptive—requires secondary meaning for legal protection.

• Chap Stick—lip balm

• Bufferin—Buffered Aspirin.

Generic—commonly used words are never protected. “All News Channel”

TRADEMARK OWNERS: DON’T BE A VERB! DEATH BY GENERICIDE

• CLASSIC EXAMPLES: KLEENEX, XEROX, TRAMPOLINE, ESCALATOR, ASPIRIN

• BUT WHAT ABOUT GOOGLE? SORRY ELLIOT, GOOGLE GETS WHAT GOOGLE WANTS.

FEDERAL REGISTRATION NOT REQUIREDBUT DON’T IGNORE—AND DO BEWARE

• TRADEMARK PRESUMED VALID AFTER 5 YEARS—NATIONWIDE COVERAGE.

• FEDERAL LAW [STATUTORY] MONEY DAMAGES INSTEAD OF PROVING ACTUAL DAMAGES

• $1K UP TO $200K PER INFRINGEMENT—UP TO $2M FOR WILLFUL INFRINGEMENT

• SMALL BUSINESS TIP: NEVER IGNORE A CEASE & DESIST LETTER

• ATTORNEYS’ FEES IN “EXCEPTIONAL” CASES—THINK WILLFUL.

COPYRIGHTCREATED WHEN FIXED

IN A TANGIBLE MEDIUM

FEDERAL REGISTRATION BENEFITS

• STATUTORY COMPENSATION: $750-$30,000. UP TO $150,000 FOR WILLFUL

INFRINGEMENT

• PRESUMED OWNERSHIP AND VALIDITY [ IF REGISTERED WITHIN 5 YEARS OF CREATION ]

• ATTORNEYS’ FEES AT THE DISCRETION OF THE COURT

DENNY ESFORD

• [email protected]

• PHONE: 312-481-8490

BANKRUPTCY PRIMER FOR

BUSINESSES AND

BUSINESS OWNERSPRESENTATION AT SBAC LAWYERS’ COMMUNITY EDUCATIONAL FORUM

FOR BUSINESS OWNERS

JUNE 19, 2019

The information herein is general in scope and nature and the actual outcome under applicable law concerning any specific situation will depend on the specific

facts and circumstances and possibly other provisions of law, if applicable. The information herein is not intended nor should it be construed to provide specific

legal advice. The views expressed are those of the presenter and are not to be attributed to Adelman & Gettleman, Ltd. or its clients.

Erich S. Buck, Esq.Adelman & Gettleman, Ltd.

53 W. Jackson Blvd., Suite 1050

Chicago, IL 60604

(312) 435-1050

[email protected]

Erich Buck is a partner and shareholder at Adelman & Gettleman, Ltd., where he

represents corporate and individual debtors, creditors and other parties in all

aspects of insolvency and bankruptcy, including workouts, assignments for the

benefit of creditors, asset sales and purchases, liquidations, reorganizations and

bankruptcy litigation. Erich has represented clients in a wide array of industries,

most recently including insurance, information technology, retail and

manufacturing.

The Bankruptcy Code

The Bankruptcy Code is broken down into

chapters, two of which are the focus of this

presentation:

1. Chapter 7 – Liquidation

2. Chapter 11 – Reorganization/Sale

Priority of Claims in Bankruptcy

1. Secured Claims

2. Administrative Expenses

A. Includes costs and expenses incurred during bankruptcy case

B. Includes claims for goods sold to a debtor within 20 days before the

bankruptcy filing

3. Priority Unsecured Claims

A. Certain prepetition employee wages and benefits, taxes, etc.

4. Non-Priority (General) Unsecured Claims

A. Often includes trade debt

Claims Bar Date

Deadline to File Proof of Claim

Chapter 7:

Generally, the proof of claim must be

filed within 70 days after the

bankruptcy case is filed (unless a notice

of insufficient assets is given).

Chapter 11:

The bankruptcy court sets a deadline

and notice is given to creditors.

Failure to File Claim – If no claim is

filed, then the creditor cannot

participate in, or receive, any recovery

for its unsecured claims.

Important to timely file proof of claim.

Reclamation Rights

1. Creditor Who Sells Goods Received by Debtor within 45

Days of Bankruptcy

A. Potential Right to Get Back the Goods if:

i. Debtor received goods within 45 days before the bankruptcy filing

ii. Debtor was insolvent

iii. Creditor makes timely written demand

iv. Goods still in debtor’s hands when demand is made

B. Reclamation Rights Depend on any Prior Liens (for instance, liens of a

lender)

2. Creditor Who Sells Goods Received by Debtor within 20

Days of Bankruptcy

A. Entitled to Administrative Expense Claim (more likely to get paid in

full)

B. Be aware of and abide by any deadlines or procedures governing

these types of claims

Critical Vendors

1. In a chapter 11 case, certain vendors of a debtor are

deemed so crucial to the debtor’s business that if the

supply of goods or services from that particular vendor

stops, the debtor’s business would be severely harmed.

2. Be aware of motion filed early in chapter 11 case that

seeks to pay pre-bankruptcy claims of critical vendors in

full.

A. Court may grant such relief but with obligations and

restrictions.

B. Know what you are getting into if you agree to be

designated as a critical vendor.

Preferences and Fraudulent Transfers1. There are several types of avoidance actions common to bankruptcy case. Two

most common actions are preferences and fraudulent transfers.

2. Preferences

If you receive property (including money) from a debtor prior to the bankruptcy filing, that transfer can be avoided (clawed back) if the transfer was:

A. for your benefit;

B. because the debtor owed you money;

C. the debtor was insolvent; and

D. made

i. within 90 days before the bankruptcy filing for a non-insider (typical vendor); or

ii. within one year before the bankruptcy filing if the creditor was an “insider” (for instance, family or officer/director).

3. Preference Defenses

A. Contemporaneous Exchange – If you provide new goods/services/payment at or about the same time as you received a transfer from the debtor, and you both intended for the exchange to be simultaneous or nearly simultaneous

B. Ordinary Course – The transfer by the debtor was either:

i. in the ordinary course of business between you and the debtor; or

ii. pursuant to ordinary business terms in your industry.

C. New Value – If you gave the debtor new goods/services/payment after you received the transfer from the debtor.

i. The new goods/services/payment may need to have gone unpaid (varies by circuit).

Preferences and Fraudulent Transfers

4. Fraudulent Transfers

A. A transfer of property by the debtor prior to the bankruptcy filing can be

avoided if:

1. The debtor intended to evade its creditors

a. For example, transferring title in a house to a family member in the middle of a lawsuit

with a creditor

2. The debtor received less than “reasonably equivalent value” in exchange for the

property (and was insolvent or rendered insolvent)

a. For example, transferring title to an unrelated third-party (not a family member), but

sold the house for half of its fair market value

B. Lookback Period

1. Bankruptcy Code – Two years from the date of the bankruptcy filing

2. State Law – It depends, but under Illinois law, four years back (subject to being

longer based upon discovery rule)

Preferences and Fraudulent Transfers –

Minimizing Your RiskIf you find your customer is “slow paying” you, or you have other reasons to believe the customer might be in financial trouble:

1. Consider obtaining a credit report or review any available public filings for information regarding the

financial condition of the company. If possible, consider asking the customer for a certified financial

statement before you agree to sell any further goods or services.

2. Consider requiring any new orders be paid cash in advance (CIA) or cash on delivery (COD).

3. Consider getting paid by ACH or wire transfer. If paid by check, deposit ASAP.

4. Consider requiring financial back-up: letter of credit, third-party guaranty, security deposit, security

interest in the goods sold (PMSI), etc.

5. Be careful about modifying invoice terms.

6. Consider shortening credit terms or pestering the customer about past-due invoices; but could hurt

your “ordinary course” defense if the customer files for bankruptcy.

7. If in doubt, probably better to take the money – a preference or fraudulent transfer is avoidable, not

criminal.

A. At worst, you ultimately have to return most if not all of the payment(s).

B. At best, you ultimately get to keep most if not all of the payment(s).

8. Talk to an attorney (shameless plug)!

Disclaimer: This presentation does not constitute legal advice or a legal opinion on any matter discussed. This presentation is for educational purposes only. If you have a specific

legal question, please consult with an attorney of your own choice.

Aaron B. [email protected]

(312)456-3661

Business Checkup

Built on a legacy that spans 150 years, Howard & Howard provides legal services to businesses andbusiness owners. We take the time to understand your goals and we do what it takes to help youreach them. With over 160 attorneys in 6 offices, our results-oriented approach is a beacon forbusiness owners in search of intelligent counsel they can trust.

More than one-third of our lawyers had business careers before choosing to become lawyers, which means we havemore lawyers with first-hand business experience than other firms our size. In fact, we operate our firm as abusiness. That perspective is valuable to our clients — coming from business makes working for business secondnature to us. This is what sets Howard & Howard apart from a generalist law firm, and what elevates us to the levelof trusted legal and business advisor for each client. We understand what you need for your business: responsive,results-oriented advisors.

© 2019 Howard & Howard Attorneys

© 2019 Howard & Howard Attorneys PLLC

Aaron B. Zarkowsky3

▪ Mr. Zarkowsky concentrates his practice on the financial services industry, representing national, regional and community lenders in real estate and asset based financing transactions with a focus on syndicated and participated loans.

▪ Additionally, his corporate and real estate practice includes advising privately held businesses on a broad range of corporate transactions, including commercial real estate sale, acquisition, development and leasing; mergers and acquisitions; and general business planning.


Introduction – Legal Checkup

▪ The business plan of entrepreneurs may focus on growth, marketing, and product or services development. Most important may be day-to-day survival. You cannot forget, however, to assess whether you have a good legal foundation to protect the long-term viability of your business. Similar to your annual personal health check-up, it's important to have a periodic legal check-up of your business. Do not

fall into the rut of putting off having your legal condition examined.

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Form of Entity5

▪ Is your entity correct to maximize tax-planning, operations and potential acquisitions? For example, a C Corporation may not be the best choice of entity if you expect to be acquired. The double taxation associated with an asset sale may limit the options for structuring the acquisition. It may be time to convert to a pass-through entity, such as an S corporation or LLC. The form of entity can also impact strategies for sharing ownership of the company with employees through incentive stock option plans, restricted stock

plans, and similar strategies.


Ownership of Interests6

▪ Have you been following corporate or company formalities to ensure proper identification of the company ownership. It is important to verify whether stock or LLC interests have been properly approved, documented, and paid for. Do you have any SEC or states securities law issues.


Governing Documents7

▪ Corporate directors and officers and LLC managers owe a fiduciary duty to the company. Governing documents should be reviewed to ensure they contain appropriate exculpation provisions in order to protect managers from frivolous lawsuits and personal liability. A legal check-up should reveal whether required annual meetings are being held, and that all meetings and formal actions are held and properly documented in compliance with the governing documents.


Buy-Sell Agreements8

▪ A Buy-Sell Agreement (for a corporation) and an Operating Agreement (for an LLC) will address changes of ownership upon the occurrence of contingencies, such as the death, disability, termination of employment, or bankruptcy of a stockholder. This document may also restrict an owner from transferring his or her interest to a third party without the consent of the other owners, or require that the other owners be given a right of first refusal.


Identifying Intangible Assets9

▪ Many of your most valuable assets are intangible. These include intellectual property, technology, non-competition covenants, contracts, leases, and technology licenses. A legal check-up can help you identify appropriately documenting these intangible assets.


Intangible Assets

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Various types of intangible assets include:

▪ Intellectual Property.

▪ Employment Agreements; Non-Competition Covenants.

▪ Contracts and Leases.

▪ Employment Matters.

▪ Data Security.


Assembling your Professional Team11

▪ Lawyers do not know everything. As part of the legal check-up, your attorney should help you confirm that you have an effective team of outside advisors, including a good CPA, HR professional, and, if appropriate, an M&A advisor and a valuation professional. Ask your CPA to begin preparing financial statements and to put in place rigorous systems for financial reporting and fraud reduction.


Office Locations

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ANN ARBOR, MI115 West Huron StreetSuite 700Ann Arbor, MI 48104-1318Phone: (734) 222-1483

CHICAGO, IL200 South Michigan AvenueSuite 1100Chicago, IL 60604-2461Phone: (312) 372-4000

LAS VEGAS, NVWells Fargo Tower3800 Howard Hughes ParkwaySuite 1000Las Vegas, NV 89169-5980Phone: (702) 257-1483

LOS ANGELES, CACentury Plaza Towers2049 Century Park East Suite 330Los Angeles, CA 90067-3105 Phone: (424) 303-7700

PEORIA, ILOne Technology Plaza211 Fulton StreetSuite 600Peoria, IL 61602-1350Phone: (309) 672-1483

ROYAL OAK, MIHeadquarters450 West Fourth StreetRoyal Oak, MI 48067-2557Phone: (248) 645-1483


These words define not only successful businesses, but alsothe law firm that represents them. Howard & Howard is thelaw firm businesses use because our vision of success is notlavishly decorated offices. The attorneys at Howard & Howarduse a different measure;

Creativity. Results. Practicality. Solutions.

LAWYERS’ COMMUNITYEDUCATIONAL FORUM

FOR BUSINESS OWNERS

Sponsored By: