Corporate Veil Protection
corporate veil protection
What is Veil Piercing Insurance?
Look at the title of this article. Have you ever heard the term ‘Veil Piercing Insurance’ before? You should not have. It is a term that is brand new to the English lexicon but will some day soon find its way in common usage. So, don’t feel bad that you may not have seen it before because in the next few minutes you will understand what Veil Piercing Insurance is and why it carries this rather unusual title.
Let me begin where most stories (but not all) begin-at the beginning. Some time ago I attended a conference of approximately 1,000 people. During that conference a gentlemen got up and spoke and, using normal sales procedure, he scared everyone into buying a Nevada LLC. His pitch was, and I am only slightly exaggerating, that Nevada Corporations could cure almost all ills. At the end of his presentation I made my way to the back of the room to see how many people were willing to pay approximately $2,500 for a corporation and little backside support. I was amazed to see approximately 300 people ($750,000) signed up. I had a rather informative exchange with the gentleman who, with this cohorts, I have referred to as selling snake oil. The reality is that a Nevada Corporation or Nevada LLC are not what those that sell them would have you believe. For a far more detailed discussion of this issue please read The Nevada Myth on the America’s Corporate Headquarters website.
But back to the title. After watching the above referenced gentleman engage in this conduct at two conventions and after a rather heated confrontation with him, I spent the next year researching and trying to determine how we would make all the snake oil promises of these this gentlemen, an actual reality regardless of the state of residence. What product would provide asset protection; risk reduction; and risk management while helping the small business owner participate in capital accumulation, reach their financial goals and eventually the financial wealth they desired.
In this process I retained the services of the very best in the areas of law, risk management, banking, business administration, retirement accounts, marketing, and many other fields. In the process I asked our risk manager, who had spent thirty plus years working at Lloyds of London, if he thought Lloyds would underwrite an insurance policy to protect business owners. We contacted Lloyds, told them what we were interested in, they were rather intrigued and put their legal team on it to see if it had ever been done before. About a week later we received an excited call from London asking us when we could come to London to discuss this topic.
Now keep in mind, and this is important, there are all types of insurance:
- General liability protect against the occurrence of liability by a business
- Directors and Officers insurance to protect (and attract) directors and officers
- Errors and Omissions insurance to protect against errors of the entity-usually a professional type of entity.
However, until that faithful day in London, there had never been an insurance that protected the owners of the corporations (and limited liability companies). While there are numerous size corporations and companies, most are held by only a few people either friends of family. Until that very day, until this very day, there has been no insurance to protect them. Do you find it strange that employees were protected; directors and officers were protected; professionals were protected; but the very people why took the risk (maybe mortgage their home) to make the business go, have had no protection? You should-we all should.
So, Veil Piercing Insurance provides business owners peace of mind with wealth and asset protection. Here is an example: If you purchased a $2,000,000 policy level and you were sued and part of that law suit sought to pierce your veil and get at your personal wealth and assets, you would be defended by the legal defense fund in the insurance policy (the policy pays the ongoing legal costs). I often ask small companies if they could afford to absorb legal costs of $300,000? I have yet to find a small business that could. However, this policy would cover those fees insofar as they sought to pierce your corporate veil.
If you are a business owner, you better be checking on Veil Piercing Insurance! Can you really afford to live without it?
Blaine T. Hofeling, Esq.
President – America’s Corporate Headquarters
Asset Protection Building Blocks That Everyone Should Understand
