Business Law

Get Ready for Due Diligence Long Before a Sale or Merger

It may seem odd, but as soon as you start up a business, you should begin preparing the documentation needed to sell or merge with another enterprise. It may be years down the road but the records often required in today’s M&A environment can be overwhelming. If your recordkeeping has been shoddy, it can be difficult or impossible to compile the information wanted by a potential buyer or partner. You don’t want to forgo opportunities just because you didn’t have the necessary paperwork in order. So what kind of information will you be asked for in the due diligence process?…

When a Company Retains Counsel for Employees

When Laidlaw International Inc. found out that a grand jury was investigating the company for allegedly submitting fraudulent invoices to a local government, it arranged for counsel for the three employees that were the primary targets of the investigation. In addition, the bus and transit company engaged a fourth attorney to represent former employees and existing staff members who were not currently the subject of the grand jury investigation. Each of the retainer agreements noted the following: The attorneys’ professional obligation was to the employees, not the company. The lawyers were not required to make disclosures to the company. Payment of fees was…

Contract Jurisdiction: Where Will a Dispute Be Heard?

Years ago, many companies dealt with vendors, suppliers, customers and others that were located in the same geographic area. Today, it’s not unusual to engage in transactions with entities in multiple states and even numerous countries. The Internet has made the business world a small place. While doing business outside your area may open up new lucrative markets, it can also make your company vulnerable to a potential trap. When signing contracts, pay attention to clauses that lay out the “choice of law” and “venue.” These clauses state what law applies and the location where disputes related to the contract…

Transfer Pricing: Maximize Opportunities and Minimize Risks

Transfer pricing continues to be one of the most important matters facing multinational companies. The tax situation in any given country can affect whether or not your business sets up facilities or holds intellectual property ownership there. The IRS and numerous tax authorities worldwide are intensifying their focus on how corporations allocate income and expenses among related entities abroad because of the potential to shift income inappropriately to lower tax jurisdictions. In order to satisfy the IRS and other tax authorities, transfer pricing must generally meet an “arm’s length” standard. In other words, the prices charged in an intercompany transaction…

LLC: A Blueprint to Limit Liability and Cut Taxes

There is generally no one legal structure that works best for all businesses. The most favorable choice depends on a number of factors, including the number of owners, your tax situation and whether or not you have employees. A limited liability company (LLC) may be a good choice because it provides flexibility, low maintenance, favorable tax treatment and most importantly, limited liability protection to keep your personal assets safe. A properly-organized LLC combines some of the aspects of partnerships and corporations into one entity. For example, general partnerships and sole proprietorships generally have no insulation from liability. But by statute,…

Gain Employee Loyalty with Commuting Tax Breaks

Commuting can be a nightmare for employees. Your company can help by offering your staff members some financial relief from their commuting hassles. Employees appreciate this benefit and there’s a bonus for your company: You can save money on payroll taxes. Similar to a cafeteria plan election, staff members can have money deducted on a pre-tax basis to be applied toward the transportation benefits. Both the company and the employee avoid payroll taxes on the salary reduction. In another option, employees can be given the choice of taking the benefit in cash. However, if an employee takes cash, the amount is…

Think You Don’t Need a Written Contract? Think Again

You’ve probably heard the old saying, “a verbal contract isn’t worth the paper it’s written on.” Yet many business owners and executives still enter into handshake deals. For example, consider the case of a successful Irish pub with a 10-year lease. The property had a great location with lots of foot traffic and a loyal clientele from the neighborhood. The lease expired but the restaurant owner and the landlord orally agreed to an extension. A short time later, the pub owner received a notice to vacate the premises. The landlord had signed an agreement with another restaurant. The Irish pub…

Business Sale: Who Owns Professional Goodwill?

When a professional corporation sells its assets or liquidates, one important tax issue is whether the corporation or the shareholder-employees own any appreciated professional goodwill (with a fair market value in excess of tax basis). For tax purposes, goodwill is an intangible asset. It represents the value of a trade or business based on expected continued customer patronage due to its name, reputation and similar factors. Such goodwill often does not appear on the corporate balance sheet, because it was developed by the corporation or by its shareholder-employees without any historical cost assigned to it for either financial accounting or…

Lease Business Property to Your C Corporation

It’s generally not a good idea for a closely held C corporation to own assets with high appreciation potential. A classic example is real estate. If your corporation owns property, it’s likely the appreciation will be hit with double taxation when the real estate is sold and you take the resulting cash out of the company. The reason is because the capital gains of C corporations are not taxed at preferential rates plus you have to worry about double taxation. When a C corp sells an asset, it is taxed at its regular corporate rate, which is 21% for tax…

Make Your Workplace Safer from Violence

Workplace violence isn’t just limited to high-risk jobs such as police officers, taxi drivers and late night convenience store clerks. Violence can happen anywhere. Workplace violence occurs at all types of businesses including factories, hospitals, engineering firms, advertising agencies and colleges. Every year, nearly two million American workers report being The most recent records by the Bureau of Labor Statistics say workplace homicides rose by 2% to 417 cases in 2015, with shootings increasing by 15%. The 354 shootings in 2015 represented the first increase since 2012.victimized by workplace violence, and many more incidents go unreported. Overall, workplace violence costs employers more…