Compete and Survive!
Upstate New York can be a challenging arena in which to conduct business today. So, what should an entrepreneur do? Lacy Katzen Executive Director, Suzanne Mayer suggests you have a strategic plan in place because the companies that honestly plan are those that will survive in an unpredictable marketplace. Strategic planning is not optional for organizations who want to succeed; instead, it is a mandatory and crucial part of the process to achieve that goal.
Throughout her career, Ms. Mayer has helped organizations devise their plans for economic growth and suggests that in today’s world, if you are not changing with the times you will not succeed.
Lacy Katzen is a firm that has grown and changed over the course of its nearly sixty years in business. This law firm has just revisited its strategic plan and is making changes in order to serve its clients better and to grow strategically. The firm will be here to help orchestrate the future of your business as you create your own plan.
Where do you start with strategic planning? Look especially at the competition and your clients to see what they are doing. Assess your client base; are they going through changes that are leading them in a new and more productive direction? What is going on in the marketplace now? What is the environment and how does it affect your business? Who is your competition? What are the strengths and weaknesses that must be identified?
Look at your clients; are you vulnerable because they are all of the same type? If so, you may need to change your client base. What are they looking for? Are their needs changing? Are they disappearing?
Change is critical to the growth of a company and should not be feared by entrepreneurs. One should consider how to respond to the changes in the marketplace, because, realistically speaking, if you are not changing, you are in serious trouble.
Organizations often think only of the bottom line, but other aspects must also be considered. Think about the people within the company and whether they are in the right positions. Will they take you to the right place in the future? Can they be groomed for change, or must you hire new people?
Committed and excited leadership is important. The culture of the organization should be considered, and whether employees are thriving in the present environment. How can productivity be encouraged? In order to feel they have some influence in accomplishing goals set by management, employees must be told how and why changes are being made and then asked how they can and will contribute to these goals.
A cautionary note from Ms. Mayer is that organizations sometimes devise a plan that ends up on a shelf and is never executed. This can signal the beginning of its demise. She advises taking a hard look at the business, assessing its needs, creating a plan, and most importantly working the plan. It is critical not to get caught up in analysis paralysis and procrastination because the world will pass you by.
This plan should include clearly defined, specific and measurable goals that include a time limit. But entrepreneurs must also be ready to adjust those goals based on changes and new opportunities.
Strategic planning should be an on-going process for any organization aspiring to growth and success. For further information and guidance, please call Jennifer Chadwick 324-5721 or Karen Schaefer at 324-5718.
More than "Just an Attorney"
To better serve his clients, David Rasmussen believes in understanding a business at its grass roots level. To illustrate this, David, his staff and other attorneys including Sarah Feingold, Matt Ryen and Terry Emmens visited Empire Farm Days this summer.
Located in Seneca Falls, this annual agricultural trade show presents products and services available to the industry. Attending this event is a way of getting educated about current trends in agriculture. Among other vendors, equipment manufacturers and distributors, biomedical, herbicide and pesticide companies were represented. “I can see no better way to learn about an industry and to serve my clients and their needs,” says Rasmussen.
Both the agricultural and the wine industries are fast-growing sectors of the New York State economy. Evidence of this is the recent opening of the New York State Wine and Culinary institute which proudly highlights these industries. Most recently, a technology farm has been proposed in the Geneva area. Scientific research for the agricultural industry would be conducted there to create nutritious foods and to promote a healthy lifestyle for consumers.
With offices in the entire region, Lacy Katzen has the ability to broadly service the agricultural and wine sectors. The firm represents many clients who are part of the chain of commerce including growers, produce brokers, processors, retailers and buyers. Attorneys must be educated in the unique laws, regulatory and legal issues associated with each area because each business is so specialized. Our attorneys have the experience and specialized knowledge to provide such legal services.
The credit union is another sector showing tremendous growth. Consumer lending and other credit union operations are expanding in New York State. Lacy Katzen has the expertise for credit union representation, since many of its attorneys have more than 20 years experience in the industry and understand laws unique to the business. If a credit union has a particular question, Mr. Rasmussen can be the point person to find an expert who can address their needs.
Attorney, David Rasmussen and paralegal, Margaret Nevins-McAdoo offer free seminars to credit unions on the topic of “Changes in Consumer Bankruptcy Laws” and strategies for maximum recovery. The most recent seminar was presented to the Rochester Chapter of New York State Credit Union League with nearly fifty professionals in attendance. Once again, this presentation affords an opportunity to understand client needs and listen to their concerns. The one and a half hour seminar is free and presented several times a year in the interest of better client customer service.
David Rasmussen is determined to serve his clients personally by taking the time to meet with them and learn first-hand the inner workings of their business. This personal time and attention is an important investment in the client/attorney relationship.
His other areas of expertise include bankruptcy, creditor’s rights, consumer collections, lending, commercial transactions, foreclosure, regulatory and real estate law. He, like all other Lacy Katzen attorneys, constantly read about changes in the law in the interest of updating their clients. Mr. Rasmussen is always available to discuss your business needs and you may contact him on his direct line at 324.5740.
Lacy Katzen expands Municipal Law Practice Group; Names Bryson Department Chair
Lacy Katzen LLP is pleased to announce the expansion of the firm’s municipal law practice group and the appointment of Daniel S. Bryson to serve as Department Chair. The firm represents several municipalities throughout New York State and has extensive experience in all aspects of municipal law including but not limited to land use planning, public finance and litigation.
Daniel S. Bryson focuses his practice in the areas of zoning/land use and tax assessment matters. Mr. Bryson has served as attorney for the Town/Village of East Rochester since 2000. He joined Lacy Katzen in 2002 and was named partner in January 2006. He is a graduate of Allegheny College and received his law degree from the University of Dayton. Dan is a member of the New York State Bar Association and the Monroe County Bar Association.
“Our newly expanded municipal law practice group will allow the firm to provide a full range of solutions to the complex legal issues our clients face,” said Peter T. Rodgers, managing partner at Lacy Katzen. “We’ve assembled a team of attorneys with in-depth municipal law experience to accomplish our clients’ objectives”. You can reach Dan Bryson at 324-5714. Other members of the team are David E. Anderson at 324-5715, Lawrence J. Schwind at 324-5705, Craig R. Welch at 324-5726, Peter T. Rodgers at 324-5707 and David Rasmussen at 324-5740.
This department handles Zoning and Land Use Planning, Public Finance, Subdivisions & Site Plans; Variances, Special Use Permits, Rezoning, SEQRA, Wireless Telecommunications, Municipal Contracts and Bidding, Drafting Legislation, Eminent Domain Litigation and Appeals, Litigation Appeals of Land Use Approvals and Denials, and Article 78 Proceedings.
Design a Plan for the Future of Your Business
By Karen Schaefer
Business succession planning is a process that should involve a team approach among the business owner and his or her advisors, including business and estate attorneys, financial advisors, accountants, appraisers and business consultants. Why should these experts be consulted?
The answer to this question is that succession planning can affect family dynamics, financial planning for the retirement of the owner of the business and the viability of the business itself. In addition, estate, gift and income tax implications should be considered. Understanding the client and his or her objectives is critical to developing a successful succession plan.
If possible, an owner should identify the successor to his or her business. This allows for the opportunity to train and prepare for succession. To make this selection, certain questions must be asked: Are there family members capable of managing the business, or are there key employees in a managerial position? Does this individual have the temperament and skill to lead a business? If a management team is identified as the successor, does the team work well together and have the capability to continue the business successfully?
Is a buy-sell agreement appropriate for or essential to the succession plan? Before structuring the agreement, the owner should be advised by the team of experts as to the various factors and components of the agreement and how it should fit into the overall succession plan. The business owner may have particular purposes that mandate the use of a buy-sell agreement, such as where ownership interests are sold or given to successors prior to the ultimate transfer of control. The owner will wish to restrict the transfer of ownership interests to ensure ownership of the business remains within the family or management group. Or the owner may wish to provide a market for his or her business at retirement, death or some other trigger event. The owner may be trying to establish a fair market price or may be trying to avoid a risky â€˜fire sale’ which can occur when there is no plan in place. Another objective may be to provide a source of income for the owner or such owner’s spouse or other beneficiaries.
What are the objectives of the successor in accepting the terms of a buy-sell agreement? He or she may want to restrict the transfer of ownership interests by the controlling owner to persons other than the successor. Or the successor may wish to establish trigger events for acquisition of the business. And finally, the buy-sell agreement can establish the methodology for determining the purchase price, the terms of payment and financing of the price.
The process of engaging in succession planning can raise numerous issues and potential conflicts. For example, a business owner may have a need for control and may have trouble letting go. Successors may seek control and make decisions benefiting their personal interests rather than those of the company, owner or family. Family conflicts among siblings, spouses and second spouses may also occur. To be successful, a succession plan should address all the issues in an appropriate way and present solutions that in the end will ensure the continued viability of the business.
Equalization problems among family members should be addressed through careful estate planning. Often those family members working in the business seek operational control and compensation commensurate with their efforts. Those outside the business seek gifts or inheritance benefits. Solutions must be developed by the team of experts to address these divergent interests. A successful succession plan for the business should be an integral part of the business owner’s overall estate plan.
Retirement planning and an exit strategy must also be planned in advance. It is important to establish a comfortable retirement plan which includes financial security for the owner and spouse. All of this can be addressed with the advice of attorneys who are well-versed in business and estate planning matters.
Karen Schaefer, Esq. has been practicing law at Lacy Katzen LLP for the past 29 years and concentrates her practice in the Business and Estate Planning areas. She is a graduate of Albany Law School. Karen counsels business owners in addressing the myriad of legal issues facing them. She is committed to developing the best personal and business plan for her clients based on their individual needs and objectives. She has been a speaker for numerous professional organization including the New York State and Monroe County Bar Associations, educational institutions, adult education programs, financial planning institutions, alumni groups and church and community organizations. She is a member of the New York State Bar and the U.S. District Court, Western District of New York. She can be reached by e-mail or 585-324 5718 (ph).
New pension law has tax advantages
In August of 2006, an important new act was signed into law. The Pension Protection Act includes over 100 new tax provisions which have implications for clients, spouses and beneficiaries. Portions of the complex law will take effect in January 2007. To better understand these, Trusts and Estates Attorney Terrance W. Emmens explains some aspects clients should consider.
Prior to the passage of the Act, a non-spouse beneficiary of a Profit Sharing, Government or Qualified Retirement Plan (e.g. 401(k), 403(b), SEP and others) was required to take as a lump sum, the entire account balance triggering enormous income tax liabilities unless the employer’s plan allowed for annuity or installment distributions. Even then, rarely did the employer’s plan allow for distributions to be spread out over the non-spouse beneficiary’s lifetime.
The new law, to become effective in January 2007, will allow non-spouse beneficiaries the opportunity to roll over qualified retirement benefits into an IRA. This is a significant change in the law and will allow for significant deferral of income tax liabilities.
The new law does not disturb the ability of the surviving spouse to roll over his or her deceased spouse’s interest in a qualified plan into an IRA.
The Pension Protection Law also encourages companies to automatically enroll workers into 401(k) plans. An employee has the choice to opt out, but this is not recommended. Effective for distribution after December 31, 2007 the new law will allow direct rollovers from a qualified retirement plan or government plan directly to a Roth IRA, provided all other conversion requirements are met (e.g. income below the $100,000 level). Hopefully, this change will encourage greater participation in retirement savings plans.
Beginning in 2008, if you are automatically enrolled in your company retirement plan, your employer should:
- Fix automatic enrollment with an employee elective deferral contribution starting at 3 percent of his or her compensation. This percentage can increase one percent annually until it reaches 6 percent.
- Make the employees’ contribution mandatory.
- Provide notice to the employee of the right to opt out of the plan.
Automatic enrollment entitles owners and other highly compensated employees to take full advantage of contribution opportunities.
You should be certain the beneficiary designations for your IRA’s and qualified retirement plans are coordinated with your overall estate plan and take advantage of all income tax deferral opportunities. For further information and advice on these and other Trusts and Estate Planning issues, please contact Terrance W. Emmens on his direct line at 585-324-5713.
Your Business Decision: S-Corp or LLC?
When setting up a new business, arm yourself with all the facts before deciding what form of entity to choose. Because, whichever entity you choose for your business will have financial, legal and tax implications.
Business owners often narrow their choices down to an S-Corporation or an LLC. The S-Corporation is one which files an S-Election for tax treatment purposes. The S-Corporation is initially less expensive to form, because there is no publication requirement -a requirement to publish a notice of formation in two newspapers over 6 weeks. The annual franchise tax is based upon wages paid, from a minimum tax of $100 to maximum of $10,000. The Corporation files a separate tax return and this may increase accounting costs for the company.
An LLC is more expensive to initially file because there is a publication requirement. The cost to publish can add $350-$450 to the costs of formation. Additionally, similar to the Franchise Tax, there are annual fees based upon the number of members in the company. The annual filing fee is $100 multiplied by the total number of members or partners in the LLC with a minimum fee of $500 and a maximum fee of $25,000. Single member LLC’s must pay an annual filing fee of $100.
One tax advantage for a single-member LLC is that the company is a disregarded entity for tax purposes, so the activity of the business is reported on the member’s income tax return. For an individual, the income would typically be reported on Schedule C or Schedule E of Form 1040. An LLC with more than one member is usually taxed as a partnership, however, and a separate income tax return is usually required.
Some basic legal differences also exist between the formation of the S-Corporation and the LLC.
The S-Corporation provides personal liability protection for its owners. Owners are called shareholders and they are issued stock certificates. Shareholders elect directors, and they, in turn elect officers. By-laws and the business corporation law govern the entity. No foreign citizens or entities can be shareholders and no corporations or LLC’s can be shareholders. There is a limit to how many shareholders are permitted in an S-Corporation. The business corporation law is restrictive and provides shareholders with certain rights.
The LLC also provides an owner with personal liability protection. Owners are called ‘members’ and are ‘interest’ holders. They can be issued membership certificates or designated a percentage of membership interest. There is no limit to the number of members in an LLC. Any entity can be a member and there are no restrictions on foreign members. An operating agreement and the limited liability company law governs the entity. The limited liability company law is not as comprehensive as the business corporation law allowing the operating agreement to have significant control over the members and their business relationships.
Unequal distributions can be made to members and special allocations can be made. In addition, a non-equity owner may be given total voting and management control of the LLC.
It is important to understand the tax implications in these two corporate entities For example, the income of each entity passes through to the individual owners, whether an LLC or S-Corp, but in an LLC where the owner is an active participant in the trade or business, all of the income is subject to self-employment tax.
In an S-Corporation, Social Security and Medicare taxes (self-employment tax) are only paid on wages received from the S-corporation. Each entity has the ability to distribute assets to the owners as a tax-free return of capital, but in an S-Corporation, the owners must be careful of disguising compensation in the form of tax-free distributions, thereby avoiding the self-employment tax altogether.
If the owners in an LLC elect to be treated as a partnership for tax purposes and guarantee any debt of the LLC, this guaranteed debt adds to their basis in the partnership. In an S-Corporation, personal guarantees do not increase your basis. In an S-Corporation, certain events may trigger the revocation of the S-election. If this happens, the corporation would be treated as a normal C-Corporation and many of the tax-related benefits of the S-Corp election would be eliminated. An LLC is treated as a partnership unless it elects to be treated otherwise, so there is no concern about revocation of elections. An LLC is more advantageous if the LLC owns assets such as real estate which are expected to appreciate in value. The LLC has the ability to distribute out the asset to an owner and the owner takes the carryover basis in the property. In an S-Corporation, the distribution is made at fair market value and the S-Corporation immediately recognizes any gain upon distribution rather than upon the sale of the asset.
If an LLC treated as a partnership redeemed the ownership interest of one of its owners for greater than book value, the partnership has the ability to step-up the basis of its assets. An S-Corporation does not have this flexibility.
In order to maximize the benefits of an entity for your business, it is important to talk with your legal counsel and accountant prior to forming any entity. Understanding the legal and tax implications of the entity you select is critical in operating your business in the future.
Partner, Jennifer Chadwick provides legal services in the areas of corporate, business and banking law. She is prepared to answer any questions pertaining to your personal business needs. You may reach her directly by calling 324.5721. Jason DeLaurentiis, CPA at DeMott & Smith also contributed to this article.
Helpful hints for the difficult task of employee termination
The life of an employer is fraught with every day challenges; add to those the real-life dilemma of having to fire an employee. Lacy Katzen’s expertise in the area of labor and employment can help you prepare for the possibility that an employee might bring a termination claim against your company.
To better understand the scenario that can occur, it is important to know the laws that can affect the process of firing an employee. New York State is an employment-at-will state, meaning that employers may fire someone for any reason or for no reason, so long as it is not an illegal reason. However, if an employer has a specific policy in place, the employer must follow its policy.
Illegal reasons to terminate an employee include termination based on age, gender, race, sexual orientation, disability, religion or national origin.
Although these can be difficult to prove, it is possible that an employee might file a claim based on one of these reasons and your company will be forced to defend it. Therefore, it is advisable that an employer keep documentation when it dismisses an employee which documents the employee’s actions over time. This paperwork might include proof of poor work performance, insubordination, or chronic absence. Documenting is critical in defending a claim, but it is not a requirement under the law.
If a former employee brings a claim against an employer, the burden is first on the employee to prove that he or she meets the prima facie requirements to file the lawsuit (in other words, on the face of it, if everything he or she says is true, they would be successful). The burden then shifts to the employer to prove a legitimate reason for termination. Some employers have a termination policy in place and if so, it should be clearly understood and strictly and consistently followed.
If you are facing a situation where you would like to terminate an employee, it is best to consult with an attorney prior to terminating rather than having to defend your actions after the fact. You may contact Jennifer Mereau at 585-324-5710 with any questions you may have.
The Ontario Chamber of Commerce has selected the branch office of Lacy Katzen, LLP as its August business of the month. Attorney Chris Mumford has practiced in the Ontario office since 1992 and specializes in real estate law. “Real estate involves people and … we need to do their work in the best and most cost-effective way we can.” He credits his reliable staff for the efficiencies and professionalism of his office.
Partner Michael Schnittman was installed as a trustee of the Monroe County Bar Association in June. He was also named a Vice President of the Volunteer Legal Services Project.
Business attorney, Sarah Feingold, also has a passion for making jewelry. So, just for fun, she decided to enter the Land of Odds annual contest, sponsored by a jewelry-arts company. It came as no surprise to Sarah when her entry won “The Ugliest Necklace in America” contest.
Managing partner Peter Rodgers delivered a lecture at the University of Rochester on September 20. The topic of the presentation was “The evaluation of a potential medical negligence claim.” The lecture was given as an offering for the Legal Nurse Consultant Program.
Mr. Rodgers was honored to be featured in a November issue of the Rochester Business Journal. The article highlighted his career and those who influenced him. It also discussed the enduring reputation of Lacy Katzen LLP throughout the years of his tenure.