Michael Ioane

Article IV

SUMMARY GUIDE ARTICLE

Guide: Structural Risk Assessment

This guide provides a practical framework for conducting a structural risk assessment across business and asset protection structures. The frameworks here reflect Michael Ioane’s approach to identifying, categorizing, and prioritizing structural vulnerabilities before they are exploited in litigation or challenged by creditors.

Assessment Scope and Frequency

A complete structural risk assessment should cover every entity and trust in the structure and should be conducted at the following intervals:

• Annual assessment: a routine review of governance records, document currency, and financial separation practices for all active entities
• Triggered assessment: a comprehensive review conducted whenever a significant change occurs, including changes in ownership, management, asset composition, or the owner’s personal circumstances
• Pre-litigation assessment: an urgent, comprehensive review when any legal claim, demand, or regulatory notice is received
• Periodic comprehensive review: a full examination of the structure’s design, operation, and document currency every three to five years, regardless of whether specific triggering events have occurred

Governance Examination Checklist

Review the following governance elements for each entity in the structure:

• Operating agreement or bylaws: current, accurate, and reflective of actual ownership and management authority
• Governance records: meeting minutes or written resolutions documenting significant decisions for the last three years minimum
• Governance actor consistency: the persons named as managers or directors in the governing documents are the persons actually exercising that authority
• Succession provisions: a documented succession mechanism exists for every governance role
• Annual compliance: registered agent, annual report filings, and state renewal requirements are current

•Intercompany agreements: all relationships between related entities are governed by written arm’s-length agreements

Financial Separation Examination Checklist

Review the following financial separation elements for each entity and the owner personally:

• Dedicated accounts: each entity has its own bank accounts used exclusively for that entity’s financial activity
• No commingling: banking records show no personal expenses paid from entity accounts or business expenses paid from personal accounts
• Correct categorization: intercompany transfers are documented and categorized correctly in each entity’s financial records
• Arm’s-length intercompany payments: lease fees, license fees, and service fees between related entities are paid on schedule at documented arm’s-length rates
• Separate accounting: each entity maintains its own financial statements, separate from other entities and from the owner’s personal finances

Finding Severity Classification

Classify each finding from the assessment into one of three severity categories to prioritize corrective action:

• Critical: findings that create immediate and substantial vulnerability to a creditor challenge or court disregard of the structure; require immediate corrective action to the extent available
• Significant: findings that represent meaningful vulnerabilities that increase the structure’s exposure to challenge over time; require corrective action within 90 days
• Routine: findings that represent minor deviations from best practices that do not create immediate vulnerability; address through normal governance maintenance within the next annual review cycle

Every assessment should conclude with a prioritized corrective action plan that assigns responsibility and a timeline for each finding.

The purpose of a structural risk assessment is not to confirm that a structure is good. It is to find where it is vulnerable before someone else does.

The information in this article reflects general structural principles and practical observations from consulting experience and is provided for educational purposes only. It should not be interpreted as individualized legal or tax advice.

Michael Ioane | MichaelIoane.com