Often the realities of a business arrangement can be quite different than a plan conceived between optimistic partners. Market conditions can change, and commitments made can become difficult to deliver, sometimes through no lack of trying. As business attorneys, we have seen situations where one partner brings technical and production know-how, and another brings the promise of market introductions and sales contacts. In an article based on many years of practice, Simon Prisk advises that breaking up a business partnership can be difficult and emotional. If the organizational documents are simply taken from a form book, the partners will face a time of uncertainty as off-the-shelf documents rarely provide helpful solutions.

Winston Churchill is known to have said that the U.S. and the U.K. are separated by a common language. The gap is much wider with the rest of Europe as tax and business terminology may be similar, but the gap in understanding is wider. One area of the law where the chasm remains wide relates to everyday corporate terms, such as par and par value for stock. Not an important term in the U.S., the concept of “par value” in Europe is extremely important, especially if the shareholders in the U.S. want dividends and the managing director in Europe desperately keeps away from any transaction that could give rise to liability if dividend distributions are found to impair capital. Simon Prisk comments on the accepted meaning of the term in the U.S. and the surprise response he encounters when advising European clients.

C.F.I.U.S. is an interagency committee authorized to review certain transactions involving foreign investment in the U.S. Its mandate is to determine the effect of such transactions on the national security of the U.S. and, where appropriate, to deny approval to the transaction. F.I.R.R.M.A. was enacted in 2018 to expand the scope of transactions that are subject to C.F.I.U.S. review. Recently, the Treasury Department proposed regulations to implement the changes under F.I.R.R.M.A. Simon H. Prisk discusses the way in which the jurisdiction of C.F.I.U.S. has been expanded.

Delaware recently amended its company law to enable a limited liability company (“L.L.C.”) to be divided into two or more newly-formed L.L.C.’s, with the original company either continuing or terminating its existence.  The amendment provides L.L.C. members with significant flexibility in separating from each other so that assets, liabilities, rights, and duties of the company can be allocated among the resulting companies.  Simon Prisk explains the change in company law.

In the latest in his series of articles on the relative flexibility of limited liability companies and their desirability for use in many instances, including joint ventures, Simon H. Prisk looks at grants of profits interests as a means of compensating service providers and employees.  If done properly, these incentives can be optimized by favorable tax treatment, achieving the same or better tax results than incentive stock options available to C-corporations and S-corporations.  If done without proper thought and planning, the results may be suboptimal.  

Commencing in January 2018, the I.R.S. began a new centralized audit regime with respect to partnerships.  It replaces the concept of a “Tax Matters Partner” with a “Partnership Representative.”  This is more than a change in name.  Unless the partnership is able to elect out of the new rules and actually does so, the I.R.S. will only deal with the Partnership Representative, and the individual partners have no right to separately appeal any tax assessment.  Additionally, the I.R.S. may now collect tax at the partnership level as a result of a tax audit.  Simon Prisk examines these and other changes – including the opt-out provisions – that will affect partnerships, partners in the current taxable year, and partners at the time that year is examined by the I.R.S.

A liquidated damage clause in a contract is an attempt by the parties to estimate damages in the event of non-performance or breach of the contract.  It represents a way to compensate the aggrieved party for an act of the other party to the agreement.  To be enforceable, the amount of the liquidated damages must not be a penalty.  Simon H. Prisk explains when these clauses should be used, whether a clause may have a problem regarding its enforcement, and what standards are used for making that determination.