Here is your August 2018 eNews from the Business Law Section (BLS)
As we wind our way through the dog days of summer, the BLS continues to forge ahead with educational programs, eBulletins, comments on pending legislation, BLN articles, networking events, and other activities designed to stimulate, enrich and enhance our members’ legal practices and personal lives.
While it is impossible to list all that the BLS is doing at any given time, here are the highlights of some of the most recent happenings at the BLS:
As mentioned in the past, the CLA is conducting a nationwide search for its first Executive Director. The search committee has received applications from many highly qualified candidates, and may have a final recommendation to the CLA Board of Representatives as early as the end of August.
The 2018 CLA Annual Meeting will be held on September 14-15, 2018, at the Sheraton San Diego Hotel & Marina, on Harbor Island. For reduced-price hotel reservations, use this special link by August 22, 2018. After that date, neither the negotiated rate nor room availability are guaranteed.
BLS Reception: The BLS will host a reception on Friday, September 14, 2018, from 5:00 to 7:00 p.m., at the Sheraton San Diego Hotel & Marina. This is always a wonderful and well-attended event, and I encourage all who attend the Annual Meeting to stop by the BLS reception.
BLS Annual Breakfast: The BLS will also host its annual breakfast program on Saturday, September 15, from 7:30 to 9:00 a.m. This year’s recipient of the BLS Lifetime Achievement Award will be Larry Sonsini, of Wilson, Sonsini, Goodrich & Rosati. The keynote speaker will be Elisa D'Amico, of K&L Gates, co-founder of the Cyber Civil Rights Legal Project. Both are highly successful attorneys and dynamic speakers, making this event one of the highlights of the Annual Meeting.
At a recent meeting, the BLS Executive Committee approved the following nominations for Executive Committee membership (2018-2021):
Additionally, the Executive Committee voted to re-appoint Jim Hill to serve a second term as the BLS Representative to the CLA Board of Representatives (BOR). Mr. Hill represented the BLS on the Council of State Bar Sections (CSBS) from September to December 2017, and on the BOR from January 1, 2018 to September 15, 2018. In January 2018, he was elected to serve as the first BOR Chair, where he has been instrumental in the massive undertaking of building this new organization from the ground up. Jim will continue to serve as BLS Representative to the CLA for the 2018-2020 term.
Congratulations to Jim Hill and the new Executive Committee members on your new appointments! I look forward to working with all of you in the coming years.
The BLS offers valuable writing opportunities for attorneys who wish to share their knowledge and develop reputations in the legal community. The opportunities include writing and editing short eBulletins or longer-form articles for the Business Law News (BLN). I highly recommend that attorneys who wish to enhance their own knowledge and careers take advantage of these opportunities. See below for ways you can take advantage of writing/editing opportunities.
Uzzi O. Raanan
Danning, Gill, Diamond & Kollitz, LLP (Los Angeles)
Chair, Business Law Section
Come join the Business Law Section of the CLA and the CMCP Ambassadors Council (CMCPAC) for a happy hour "Networking @ Nite" event on August 9th at Luka's Taproom and Lounge in Oakland, where you can mix and mingle with Bay Area business lawyers who are passionate about increasing diversity and inclusion in the legal profession. The BLS and CMCPAC hope that you will experience an evening of collaborative discussion, while creating strategic relationships, meeting new friends and enjoying delicious food and drink. This event is FREE.
More Information Here
The Insolvency Law Committee (ILC) was well-represented at the 2018 Ninth Circuit Judicial Conference, which took place July 23 through 26 in Anaheim. ILC member Misty Perry Isaacson, incoming ILC member Maggie Bordeaux, past ILC member Jamie Dreher, past ILC Co-Chairs and current BLS Executive Committee members and advisors Tom Phinney and Corey Weber, all attended the conference as lawyer representatives to the Ninth Circuit Judicial Conference.
The conference is an annual event that brings together the federal judges, lawyer representatives appointed by the District Courts in each of the districts, and clerks of court. The Ninth Circuit Judicial Conference is held pursuant to 28 U.S.C. Section 333, which permits each circuit to hold a conference "for the purpose of considering the business of the courts and advising means of improving the administration of justice within such circuit." Among the outstanding speakers at the conference was Justice Anthony Kennedy, Associate Justice of the United States Supreme Court, who was interviewed by the Hon. Autumn Spaeth (U.S. Magistrate Judge, Central District of California) and the Hon. Edward Davila (U.S. District Judge, Northern District of California).
The ILC congratulates Misty Perry Isaacson, who was elected as Vice Chair of the Lawyer Representatives Coordinating Committee (LRCC) for the Ninth Circuit Judicial Conference. The LRCC works with the federal judges of the Ninth Circuit to coordinate programs and events throughout the year.
The BLS is comprised of 15 standing committees whose members review and propose legislation, draft eBulletins, BLN articles, and practice guides, and speak at live and webinar programs. The committees meet between 5 and 10 times each year, usually by telephone. Committee members develop valuable personal and business relations with other practitioners in their respective fields of practice.
To qualify for membership, a practitioner must be a member of the BLS and have practiced law at least five years. Each committee is comprised of 16-30 members, selected for 3-4 year terms.
(Note: Existing members were automatically appointed to the same committee for their remaining term under the CLA. Applications are only required for new members or for those whose terms expire in 2018.) Applications can be found here.
Please send the completed application to John Buelter, firstname.lastname@example.org.
Courtesy of CEB, we are bringing you selected legal developments in areas of California business law that are covered by CEB’s publications. This month’s feature is from the April 2018 update to Selecting and Forming Business Entities (2d Ed CEB). References are to the book’s section numbers. See CEB’s BLS Landing Page for special discounts for Business Law Section members. The most significant legal developments since the last update include developments in such important topic areas as federal and state taxation, professional responsibility, limited partnerships, limited liability companies, and other areas.
April 2018 Update
Congress enacted the Tax Cuts and Jobs Act (Pub L 115–97, 131 Stat 2054), effective January 1, 2018. Among its provisions affecting business entities, the Act makes the following changes:
Entitles shareholders or members of "pass-through" entities, depending on the nature of the business, to a deduction of the lesser of 20 percent of ordinary income less net capital gain or 20 percent of "qualified business income." IRC §199A(a)–(b). See §§2.121, 2.128, 2.135, 2.145, 5.17, 6.5, 7.9, 8.5, 10.13, 10.14, 11.5.
Reduces the federal corporate tax rate to a flat 21 percent. IRC §11(b). See §§2.121, 10.13.
Changes the rules regarding net operating losses such that new net operating loss deductions are limited to 80 percent of taxable income, the 2-year loss carrybacks and other specified loss carryback provisions are eliminated except for certain net operating loss carrybacks from farming operations, and there are now indefinite loss carryforwards. IRC §172. See §§2.123, 12.13.
Provides a 100 percent deduction of the cost of certain assets under IRC §179 as an expense deduction, rather than treating the cost as a capital expenditure subject to depreciation, subject to several limitations. IRC §179.
Provides for a bonus first-year depreciation allowance for “qualified property” (including newly acquired used property as well as new property) of 100 percent, which phases down after December 31, 2022. IRC §168.
Repeals former provisions for a deemed "technical termination" of a business entity. IRC §708(b). See §§2.142, 6.115, 11.147.
Provides that if any gain on a disposition of a partnership interest is treated as effectively connected with the conduct of a trade or business in the United States, the transferee is required to deduct and withhold 10 percent of the amount realized on the disposition unless the transferor furnishes to the transferee an affidavit stating that the transferor is not a foreign person. IRC §1446(f). See §§5.94, 5.101.
Changes the treatment of so-called "carried interest," such that, for tax years after December 31, 2017, certain long-term capital gains that a taxpayer receives with respect to certain partnership interests may be treated as short-term capital gains if the gains are derived from assets held for 3 years or less. IRC §1061. See §6.75.
Changes certain limitations on the use of the cash method of accounting to raise the gross receipts threshold provided in IRC §448(c)(1) from $5,000,000 to $25,000,000. See §§2.125, 2.143, 6.111.
Lowers the amount that a corporation may take as a deduction with respect to dividends received from other corporations from 70 percent to 50 percent. IRC §243(a). See §10.12.
Permits an employee to exclude from gross income up to $260 per month in 2018 for "qualified parking," although this exclusion does not apply to self-employed individuals, partners in a partnership, or 2 percent shareholders of S corporations. IRC §132. See §10.12.
Permits a member of an LLC to deduct the member's distributive share of LLC loss to the extent of the member's adjusted basis in the membership interest. IRC §704(d). See §11.23.
The Bipartisan Budget Act of 2015 (BBA) (Pub L 114–74, 129 Stat 684) and the new streamlined structure it created for auditing entities taxed as partnerships and their partners at the partnership level became effective as of January 1, 2018. The IRS issued a Notice of Proposed Rulemaking containing proposed regulations to implement the provisions of the BBA (82 Fed Reg 27334 (June 14, 2017)). It subsequently supplemented those regulations with additional proposed rules in
Under California tax rules, S corporations are generally treated as "pass-through" entities for income tax purposes but must still pay a reduced rate of California tax on corporate income. For 2018, the rate is 1.5 percent. Rev & T C §§23151, 23501, 23802(b)(1). See §10.14.
The California Franchise Tax Board has taken the position that if a member of an LLC that is doing business in California is an entity, then the member-entity is also doing business in California and must pay the annual $800 franchise fee. If the member-entity is strictly a passive member in the LLC, then it is not required to pay the fee. Swart Enters., Inc. v Franchise Tax Bd. (2017) 7 CA5th 497; FTB Notice 2017–01. See §11.7.
A California district court held that a law firm's previous representation of a closely held company and its insiders did not disqualify the firm from defending the insiders in a successive shareholder derivative suit. Beachcomber Mgmt. Crystal Cove, LLC v Superior Court (2017) 13 CA5th 1105. See §1.4.
A California district court held that a limited partner is not prohibited from entering into a contract with a third party in which the partner agrees to turn over to the third party distributions he or she receives from the partnership and that the third party is merely precluded from being recognized as a limited partner if the partnership agreement requires the partners' approval and the approval has not been given. SP Inv. Fund I LLC v Cattell (2017) 18 CA5th 898. See §6.115.
Limited Liability Companies
Limited Liability Companies
The mistaken designation of an individual signing an agreement as the "managing member" of an LLC did not invalidate the agreement for lack of authority in the absence of actual knowledge by the other party that the individual had no authority to execute the document.
Western Surety Co. v La Cumbre Office Partners, LLC (2017) 8 CA5th 125. See §6.115.
A California court has allowed a judgment creditor of a man and his wife, who were the sole owners of an LLC, to enforce a judgment against the assets of the LLC. Curci Invs., LLC v Baldwin (2017) 14 CA5th 214. See §11.26A.
Although general partnership interests may or may not be securities under federal law, in a Texas case, a federal district court found a joint venture to be a security. SEC v Sethi Petroleum, LLC (ED Tex 2017) 229 F Supp 3d 524. See §12.20.
California Secretary of State
The Secretary of State has revised many of its forms, including the following:
The United States Department of Justice maintains a List of Pro Bono Legal Service Providers in immigration court and legal aid centers in California. It is located here.
Information about other Pro Bono Opportunities can be found on The State Bar of California’s website.
If you know of other opportunities for pro bono help from BLS members, please contact Dennis Wickham, email@example.com.
The 15 BLS Standing Committees publish eBulletins announcing developments in their area of law and upcoming events open to BLS members. Click here to sign up to receive these eBulletins from any BLS Standing Committee completely free of charge.
Did you know that the BLS maintains a presence on LinkedIn, Twitter, and Facebook where BLS posts regular updates about new cases, new regulations, key legislative developments, and news and events from the BLS’s Standing Committees? What you may not know is that you can not only send items to the BLS to post or tweet, but also suggest items from your own social media pages for the BLS to re-post, re-tweet, or like. Doing so expands the reach of what you have to say to everyone who likes or follows the BLS on its various social media platforms, and may result in the BLS following you! Please submit your suggested items for consideration or direct any questions to BLS Social Media Coordinator, Reno Fernandez (reno@MacFern.com) and join the ever-expanding discussion!
Dennis Wickham, Editor-in-Chief
Cathryn S. Gawne, Contributing Editor
Kenneth Minesinger, Contributing Editor
Corey R. Weber, Contributing Editor
Monique D. Jewett-Brewster, BLS Vice Chair of Publications
Uzzi O. Raanan, BLS Chair