By: Craig S. Marshall

Organizational Forms

The choice of form of entity to conduct an ongoing business, to start a new business, to own property, to enter into joint ventures, or even for estate planning purposes is an important decision that offers many alternatives. Protection from personal liability and tax consequences often rule the decision-making process. There is no pre-determined organizational form that works best for any specific circumstance. An attorney who has the experience utilizing the various organizational forms under a variety of circumstances can add value to the decision-making process. The organizational form needs to be created to withstand potential claims from third parties such as creditors against the individual owner(s). In addition, clear and concise operational rules and other management guidelines of the organization need to be established to address the objectives of the owner(s).

Finance & Public Law...

By: Thomas R. Trotter

Managing Swaps
Borrowers often use derivatives—such as interest-rate swaps—to manage their interest-rate exposure. For example, a borrower could swap a variable interest rate for a fixed interest rate. What you should know about swaps: (1) The swap is made orally. The documents are signed later. You must clearly understand the terms of that oral agreement. (2) The derivative documents are standard, but that doesn’t mean they’re non-negotiable. Your lawyer can protect you by reviewing and negotiating the agreement. (3) You can hire a swap advisor to evaluate the swap. A relatively small fee can save you many times its cost.

Tax Law...

By: David J. Lewis

Revoking Code 83(b) Elections
Code section 83(b) elections enable an employee to pay tax on ordinary income measured by the difference between the fair market value and the amount paid for property transferred by an employer. A decrease in value attributable to a mistake of fact has not until now allowed employee redress. In June, IRS released Revenue Procedure 2006-31, 2006-27 IRB, which authorizes an employee to revoke Code section 83(b) elections within 60 days of discovering a “mistake in fact.” The mistake must concern a fact that forms the very basis of the transaction, such as transfer of stock that differs from the class of stock expected. This relief will be narrowly construed, however, and mistakes concerning value though do not qualify.

Employee Benefits Law...

By: Thomas J. Sigmund

Earning Maximum Benefits
Employees who reach their maximum contribution limits under an employer’s defined contribution plan (“dc plan”) can still earn maximum benefits under a defined benefit pension plan (“db plan”).  If an employer sponsors both a dc plan and a db plan, an amount equal to 25 percent of the total compensation of all plan participants can, in the aggregate, be contributed and deducted by the employer to these plans.  The spread between 25 percent of covered compensation and the amounts being contributed to a dc plan is available to be contributed to a db plan.  If principals of a company are 10 years older or more than other employees, the lion’s share of the contributions will benefit the principals.

Nonprofit Law...

By: Gerald B. Chattman

The Key to Sarbanes Success
As nonprofits voluntarily comply with Sarbanes-Oxley or are being required to do so by national associations, an often overlooked area is the necessity for reviewing the audit process. Every nonprofit should form an audit committee to supervise the hiring and retention of its auditing firm and to make sure that the agency addresses any audit suggestions from that firm. Further, the auditing firm itself, or at least the account manager, needs to be changed every three to five years. Good auditing and transparency are nonprofits’ key to success in the new Sarbanes world.

Environmental Law...

By: William L. Caplan

Seller’s Due Diligence
Before signing any contract for the sale of commercial real property, a seller should complete its own environmental investigation of its property. Based upon the results of seller’s investigation, the seller will be in a better position to control the parameters of any required remediation of its property, and to structure the sales transaction to minimize potential future environmental liability. Otherwise, if the seller allows a buyer to control the environmental investigation, and environmental contamination is discovered by the buyer, the seller’s costs associated with remediation of the property will oftentimes be significantly greater, and the buyer will control the contractual issues relative to future environmental liability.

Mergers & Acquisitions...

By: Robert W. Malone

Structuring Your Acquisition
Many clients who are selling or purchasing a business do not involve their lawyers at the initial negotiation stage. Their thinking is that price and structure must be agreed upon and then the lawyers task is to draft the purchase agreement. This can be a grave mistake as the structure of an acquisition affects price and has other important implications that should be analyzed by an attorney. Structure may affect price either because the parties misunderstand the affect of items such as accounts payable, accrued expenses, inventory valuation and pre-closing operations or loss or because the structure increases or decreases the seller’s after-tax proceeds or the buyer’s after-tax cost. While most clients are aware that a transaction may be structured as an acquisition of stock or assets, they do not fully appreciate all of the differences associated with those choices and that there are many other alternatives available that have varying tax and other consequences. The members of our Mergers & Acquisitions Practice Group would be happy to advise you concerning the best structure for your acquisition. Proper and timely advice on this subject can avoid a misunderstanding between the parties concerning the consequences of a type of acquisition or, worse yet, agreement to a structure proposed by the other party who understands the implications of the proposed structure while our client does not.

Securities Law...

By: John F. Ballard

Pitfalls From State to State
Every security-shares of stock, notes, partnership and limited liability company interests, etc.- sold in the United States either must be registered with the Securities and Exchange Commission (SEC) or qualify for an exemption from registration. Each security also must either be registered or exempt from registration in all states in which investors are offered or sold the securities, or that have sufficient contracts with the sales process. State registration exemptions differ dramatically from state to state. A federal exemption does not guarantee a state exemption (or vice versa), nor does an exemption in one state mean that a comparable exemption will be available in another. Careful planning and design of any proposed securities issuance is necessary to avoid common and costly pitfalls.

Entertainment & Sports Law...

By: Adam W. Heller

Amateur/Professional Status
College athletes and universities face a number of legal issues in their attempts to maintain “amateur status” under NCAA guidelines. For example, Tom Zbikowski, an All American safety for the Notre Dame football team, recently participated in a professional boxing match that took place at Madison Square Garden. The NCAA has carved out limited exceptions to their guidelines that allow athletes in certain situations to participate in one sport as a professional while maintaining amateur status in another. The NCAA allowed Zbikowski to be paid for the professional bout, but he was not permitted to earn any endorsement money without surrendering his eligibility to play football at Notre Dame this fall.