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Tag: liability

  • Insurance for self-employed Canadians: What coverage do you need? – MoneySense

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    If you are self-employed, the onus for insurance coverage is squarely on you. If you are considering self-employment or are already self-employed, consider whether the following types of insurance apply to you. 

    Life insurance

    If you have a spouse and/or children who rely on your income, you should probably have life insurance. It could replace that income if you were to die, protecting your family from financial hardship. 

    How much life insurance do you need? 

    You need enough life insurance to cover your financial obligations—such as a mortgage and personal debt—and provide sufficient care for your dependents.

    Although a family’s expenses could decrease if someone died, most households have lots of fixed expenses like rent, mortgage payments, property taxes, insurance, utilities, children’s expenses, and other costs that do not change if there is one less family member. In some cases, a family’s expenses could even increase to account for additional help like a nanny for little ones or other help around the house.

    A business owner may also consider life insurance to provide cash for their business to keep operating. If the business’s value could be impaired by their death, a life insurance policy paid for and owned by the business could provide the funds to hire a replacement or shore up cash flow.

    Some business partners agree to have life insurance on each other. This coverage can provide funds for the survivor(s) to buy the deceased partner’s share of the business from their family. 

    When you buy life insurance, you can buy term life insurance that covers you for a certain number of years, or you can get permanent life insurance that is notionally meant to keep forever. Permanent insurance contains an investment component, whether it’s whole life or universal life insurance. Premiums tend to be higher for permanent coverage since the risk of death rises with age. But term insurance generally has a renewal feature, whereby you can renew at progressively higher premiums for subsequent terms.

    Business owners with corporations are often pitched life insurance as a tax and investment strategy, especially whole life and universal life insurance. These policies generally have high monthly premiums and are meant to provide future retirement income or a larger estate value.

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    Corporately owned life insurance definitely reduces tax because you are putting money into a life insurance policy instead of into corporate investments, which generally produce taxable income. But the trade-off may be higher fees than comparable investment options. As a result, you may not be further ahead.

    It is also important for business owners to consider other tax-efficient saving options like registered retirement savings plans (RRSPs) and tax-free savings accounts (TFSAs). If RRSP and TFSA accounts are not maxed out already with a reasonable expectation that maximum contributions can continue, a corporate life insurance policy for any reason beyond risk management—that is, for tax and investment reasons—should be considered with caution.

    Corporately owned life insurance can be a great opportunity for someone who has more money in a corporation than they are ever going to spend during their own lifetime. It can provide a larger after-tax estate for their beneficiaries than other corporately held assets, since the proceeds can come out of the corporation tax-free, unlike the withdrawal of other corporate assets by the beneficiaries. Just be careful about overcommitting to too large a policy.

    Compare life insurance quotes and save

    Request a personalized quote and consult with an expert about your coverage needs. Get the protection you need at the right price.

    Disability insurance

    A disability can hurt a family’s financial well-being and progress. Like life insurance, it is important to have if you have beneficiaries. But even if you don’t have family members depending on your income, you should have disability insurance for as long as you are still working out of necessity rather than by choice.

    What does disability insurance cover?

    Disability insurance provides a monthly payment to you if you cannot work due to an illness or injury. Some policies last for a certain period like 24 months after disability, while others last until a certain age, like 65.

    Some policies will pay your monthly benefit if you cannot work your current job (called “own occupation”), while others (called “any occupation”) may not pay out if you can work another job in another field.

    The risk of disability for most working Canadians is higher than the risk of dying. That’s why the monthly premiums tend to be more expensive than those for a life insurance policy. This is often a deterrent from purchasing disability insurance.

    Most insurance agents focus primarily on life insurance over disability insurance. As a result, life insurance tends to be sold more often than disability insurance. But a savvy business owner looking to reduce their financial risks should be buying disability insurance to protect themselves and, if applicable, their family.

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    Jason Heath, CFP

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  • Paring 11 Iconic Paintings To Lorde’s Melodrama

    Paring 11 Iconic Paintings To Lorde’s Melodrama

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    Summertime is in full swing which means it’s that time of year again to press play on Lorde’s discography. From Pure Heroine to Solar Power, Lorde seems to never disappoint eager fans. It’s been 7 years since Lorde’s greatest project, Melodrama, became ours. Mega Lorde fan or not, you’ve probably heard a majority of the songs on the album and related to many. It’s about growing up, making mistakes, falling out of love with yourself and others, and finding what makes life exciting. 

    But, what makes Melodrama so iconic? We have to start with the cover art. It’s literally art that if we saw it walking through the MoMA, we wouldn’t think twice. The hues of blues, browns, and pinks on the cover give the songs so much life and really remind us that making timeless music, like that on Melodrama, is a true form of art. 

    Here are 11 iconic paintings that pair perfectly with each song on the album. 

    ‘Green Light’

    “’Cause honey I’ll come get my things, but I can’t let go/I’m waiting for it, that green light, I want it/Oh, I wish I could get my things and just let go/I’m waiting for it, that green light, I want it”

    When thinking about lighting in famous paintings, we first thought of Nighthawks by Edward Hopper. The subtle green lights shining in front of the diner add so much dimension to the painting, just like ‘Green Light’ adds character and depth to Melodrama.

    Find Nighthawks at The Art Institute of Chicago.

    ‘Sober’

    “We’re king and queen of the weekend/Ain’t a pill that could touch our rush/(But what will we do when we’re sober?)/Uh, when you dream with a fever/Bet you wish you could touch our rush/(But what will we do when we’re sober?)”

    Whether you are a wine girlie or a beer girlie (or neither!) you probably recognize Bacchus by Caravaggio. This painting portrays a young Dioynusus (or Bacchus in the Roman language), the God of Wine, inviting viewers to join him for a glass of red wine. The Greeks had it pretty great, huh? If we could eat grapes from the vine under the Grecian sun all day, we would. Lorde‘s music is the closest we come to a perfect summer vacation!

    Find Bacchus at the Uffizi Gallery in Florence, Italy.

    ‘Homemade Dynamite’

    “Might get your friend to drive, but he can hardly see/We’ll end up painted on the road, red and chrome/All the broken glass sparkling/I guess we’re partying”

    When we listen to ‘Homemade Dynamite’ we envision a room up in flames (metaphorically or literally) either because the music is just that good or because of a different reason. For this reason, we paired the third track on the album with The Burning of the Houses of Parliament by J.M.W Turner and William Turner. Turner’s painting mixes beautiful hues of red and orange that almost make the viewer feel calm amid the chaos. This mirrors how we feel when we listen to Melodrama.

    Find The Burning of the Houses of Parliament at The Tate in London, United Kingdom.

    ‘The Louvre’

    “Our thing progresses/I call and you come through/Blow all my friendships/To sit in hell with you/But we’re the greatest/They’ll hang us in the Louvre/Down the back, but who cares—still the Louvre”

    This is one of our favorite, if not our number one, track on the album. Blasting this song on full volume makes us want to run down the miles and miles of halls in The Louvre with our besties and Lorde herself. Naturally, we went with the most famous painting housed in The Louvre, The Mona Lisa by Leonardo da Vinci.

    Find The Mona Lisa at The Louvre in Paris, France.

    Image Source:  Jacques Bopp | Unsplash

    ‘Liability’

    “They say, “You’re a little much for me/You’re a liability/You’re a little much for me”/So they pull back, make other plans/I understand, I’m a liability”

    A famous painting that evokes feelings of horror, sadness, and grief is The Scream by Edward Munch. The beauty of art is that each person who views (or listens) to it, can interpret it differently. That’s how we feel about ‘Liability’ and The Scream. Some may find it beautiful, others may feel uncomfortable. How do you interpret these two pieces of art?

    Find The Scream at The National Museum in Oslo, Norway.

    ‘Hard Feelings/Loveless’

    “Hard feelings/These are what they call hard feelings of love/When the sweet words and fevers/All leave us right here in the cold-old-old/Alone with the hard feelings of love/God, I wish I believed ya/When you told me this was my home-ome-ome”

    When deciding which painting to pair with ‘Hard Feelings/Loveless’ we wanted to pick something that evoked heartbreak and pain. Ophelia by John Everett Millias is stunning, yet quite painful to look at. A young woman bathed in flowers, lying in a pool of water, yet we cannot tell if she is miserable or simply full of bliss. Is this what it feels like to be “alone with the hard feelings of love?”

    Find Ophelia at The Tate in London, United Kingdom.

    ‘Sober II (Melodrama)’

    “All the glamour and the trauma/And the f***** melodrama, whoa, whoa/All the gun fights and the lime lights/And the holy sick divine nights, whoa”

    You know we couldn’t forget about the man himself, Vincent van Gogh. He’s created dozens of iconic paintings that we know very well and love today. But, have you seen The Drinkers by Vincent van Gogh? It features his same artistic flair that makes his work stand out, but also relates to the themes in ‘Sober II (Melodrama).’

    Find The Drinkers at The Art Institute of Chicago.

    Image Source: Redd F | Unsplash

    ‘Writer In The Dark’

    “I am my mother’s child, I’ll love you ’til my breathing stops/I’ll love you ’til you call the cops on me/But in our darkest hours, I stumbled on a secret power/I’ll find a way to be without you, babe”

    The lore behind this song cannot go without a quick mention…but, what does the song really mean to us? Writers, and creators alike, are often misunderstood but quickly become the ones to be celebrated later on in life for their accomplishments that were once taken for granted. One of our favorite paintings depicting a writer is that of Emile Zola by Edouard Manet. The scattered feather pens and messy workspace is so relatable!

    Find Emile Zola at the Musée d’Orsay in Paris, France.

    ‘Supercut’

    “So I fall/Into continents and cars/All the stages and the stars/I turn all of it to just a supercut”

    Deciding to chase a memory so far away from your mind is a hard decision to make. Whether that’s in love or in familial relationships, sometimes things happen that we wish to forget about altogether. The Persistence of Memory by Salvador Dalí reminds us of those themes. We can try our hardest to erase our memory, but it always remains persistent. The clocks draped over various objects remind us that time cannot be warped, no matter how hard we wish it to be.

    Find The Persistence of Memory at the Museum of Modern Art.

    Image Source: Jamison McAndie | Unsplash

    ‘Liability (Reprise)’

    “And maybe all this is the party/Maybe the tears and the highs we breathe, oh no/And maybe all this is the party/Maybe we just do it violently”

    Every time we listen to this song we get quite emotional. We can never stop the tears from falling down, so we just let ourselves feel all the feels that Lorde evokes within us. To match with us, we’ve chosen Crying Girl by Roy Lichtenstein. We love the style of art that Lichtenstein took with this painting and hope that Lorde gains inspiration from it for future cover art!

    This painting is currently not on view.

    ‘Perfect Places’

    “All of the things we’re taking/‘Cause we are young and we’re ashamed/Send us to perfect places/All of our heroes fading/Now I can’t stand to be alone/Let’s go to perfect places”

    When we think about perfect places and perfect landscapes, we instantly think of Claude Monet. Our favorite Monet is The Artist’s Garden at Giverny. If we could escape to any place, it would be the garden portrayed here. Perfect places are full of brightly colored flowers and the serenity that nature brings. How would you paint your perfect place? Or, how would you write about it in a song?

    Find The Artist’s Garden at Giverny at the Musée d’Orsay in Paris, France.

    Image Source: Jonathan Borba | Unsplash

    Which song on Melodrama is your favorite? Be sure to let us know by tweeting us at @thehoneypop or visiting us on Facebook and Instagram.

    TO LEARN MORE ABOUT LORDE:
    FACEBOOK | INSTAGRAM | TWITTER | YOUTUBE

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    ableimann

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  • Unexpected Liability For Owners Of Small Businesses

    Unexpected Liability For Owners Of Small Businesses

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    An entrepreneur wants to create a small business. So they set up a corporation or a limited liability company online, because they know that’s how you’re supposed to do it. That way, your personal assets aren’t supposed to be at risk if the business fails. It’s a good insurance policy.

    A recent New York case demonstrated once again that the corporate-structure insurance policy might not be so good after all.

    There, a person named Yuan Sheng Situ (or perhaps Su Hua Situ) apparently created and owned a company that signed a lease as tenant. The tenant took possession of the leased premises but never paid any rent. The landlord sued the tenant on the lease, of course, but also tried to sue the individual owner of the company (the “individual defendant”) for the unpaid rent.

    The individual defendant presumably argued (or should have argued) that the only tenant on the lease was the corporation, there was no personal guaranty, the landlord had chosen to do business with a corporation, the landlord should have known what a corporation is, and therefore the landlord should only be able to sue the corporation even though the corporation had no assets. Whether based on those good arguments or other arguments, the individual defendant asked to be removed from the landlord’s lawsuit.

    The court that initially heard the case refused to do that. The appellate court agreed. To the contrary, both courts accepted the proposition that the landlord might very well be able to “pierce the corporate veil” and convert the claim against the corporation into a claim against the individual defendant. That could happen because the individual defendant somehow lost the protection the corporate form was supposed to provide.

    Exactly what did the individual defendant do to expose itself to that risk? According to the appellate court, the individual defendant negotiated the lease on behalf of the corporate tenant. The landlord communicated with the individual defendant almost daily to negotiate the lease. The individual defendant was in the leased premises “on almost a daily basis.”

    All those things are, however, exactly what always happens when someone sets up their own corporation and then runs that corporation’s affairs. Those ordinary activities of a corporation’s owners are just how any corporation works. The fact that the corporation’s owners do things in their role as corporate officers shouldn’t create individual exposure. How else are corporations supposed to conduct business?

    The court also stepped back a bit and declared that the lease “resulted in inequitable consequences” because the tenant didn’t pay rent. In other words, the individual defendant “conspired to perpetrate a wrong by opening a judgment proof shell company” to avoid paying rent. If the landlord wasn’t happy with the credit strength of the corporation, though, it should have demanded a personal guaranty, a larger security deposit, or a better tenant entity. The fact that it didn’t do those things doesn’t mean the landlord should have a good claim against the corporation’s owner. The landlord chose to deal with the corporation.

    Those are great arguments, of course. But the individual defendant remains stuck in this litigation, facing potentially substantial claims. The use of a corporation was supposed to protect the individual defendant from those claims.

    An owner of a small business can, of course, avoid that problem by making sure that its corporation always pays its debts. But sometimes that doesn’t happen. The essential function of the corporate form is to protect the owner of the business. If the facts of this case are enough to convince a court to remove that protection, then any small business owner shouldn’t rely on the use of a corporation as a way to protect the owner’s other assets.

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    Joshua Stein, Contributor

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  • The Next Few Landmines In Nonrecourse Carveouts

    The Next Few Landmines In Nonrecourse Carveouts

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    Nonrecourse carveout guaranties are part of the landscape for commercial real estate loans, much as landmines are part of the landscape for recent war zones.

    These nonrecourse carveout landmines have often exploded dramatically in the faces of carveout guarantors. Guaranties triggered full recourse for the loan if the borrower violated one of several dozen single purpose entity covenants, ranging from the trivial to the fundamentally misguided.

    In the latter category, some SPE covenants required the borrower to remain solvent or limit its ordinary indebtedness to certain capped amounts—covenants the borrower would inevitably violate if it got into financial trouble. The guarantor could face personal liability for the entire loan if the property couldn’t cover its expenses. Such exposure is fundamentally inconsistent with the logic of nonrecourse financing.

    Many lenders have corrected their documents to prevent such anomalies. Today’s updated SPE covenants often don’t support claims for liability of the type suggested in the previous paragraph. Instead, liability depends on whether the borrower, controlled by the guarantor, actually did bad things that hurt the lender.

    That doesn’t mean all of the landmines have been cleared. At least two significant landmines remain. More will surely become apparent in the litigation that today’s commercial real estate downturn will trigger.

    As one significant remaining landmine, many nonrecourse carveout guaranties make the guarantor personally liable for the entire loan if any voluntary lien is recorded in violation of the loan documents. Lenders have been known to claim that mechanics’ liens are voluntary on the basis that the borrower chose to order construction work and then chose not to pay for it. If a mechanic’s lien gets filed, the lender can then try to assert that the guarantor becomes personally liable for the entire loan.

    That picture has two things wrong with it. First, the lender’s interpretation of “voluntary” seems unreasonable. Worse, if the lender is right, the mere filing of a mechanic’s lien triggers full personal liability for the loan, even if the borrower quickly removes the lien. In contrast, the loan documents themselves typically give the borrower reasonable time to cure a problem before the lender can take action. That different treatment means the mere filing of a mechanic’s lien could make the guarantor immediately liable for the full loan even though the borrower itself still had time to fix the problem. The same is true if the borrower does somehow carelessly file a lien that is truly “voluntary.”

    Borrowers and guarantors can and should solve those problems. First, they should insist on defining “voluntary” lien narrowly, to capture only cases where, for example, the borrower intentionally creates a junior lien, such as a second mortgage. Whether or not that position prevails, the guarantor should insist on having notice and opportunity to cure before any voluntary lien, however defined, triggers full personal liability for the entire loan. Guarantors should have at least the same protections as the borrower. Practically no nonrecourse carveout guaranty extends that sort of courtesy to any guarantor if any lien arises.

    Similar anomalies arise if the borrower incurs prohibited indebtedness. The loan documents give the borrower some time to correct (repay) that indebtedness. The guarantor should demand similar protection. If the prohibited indebtedness arises because the property is sucking wind, that shouldn’t trigger any guarantor liability at all.

    Another landmine: if a troubled borrower admits in writing that it can’t pay its debts, most loan documents make that a default. It also usually makes the guarantor personally liable for the whole loan. That’s partly because such an admission can help the borrower’s creditors start an involuntary bankruptcy or similar proceedings under state law. The lender doesn’t want that to happen. That all sounds reasonable.

    It may, however, mean that ordinary, innocent communications with creditors, or even the lender, about the borrower’s financial problems can conceivably create exposure for both the borrower and the guarantor. If the borrower admits in those conversations that it can’t pay its debts, the guarantor might face personal liability for the entire loan. If the admissions are accurate, however, and the borrower in fact can’t pay its debts, does it really even do much incremental damage if the borrower admits a fact that is staring everyone in the face?

    A careful guarantor will want to limit the “admission of inability to pay debts” trigger for liability as much as possible, or even eliminate it. If written broadly, as it usually is, it creates a tripwire and could give the lender all kinds of opportunities to try to make the guarantor personally liable for the whole loan.

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    Joshua Stein, Contributor

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