Podcasts

Expert Insights: 2018 Entity Compliance Review for Law Firms, Part 2

In a two-part interview with Expert Insights, Marcia Suelzer, Senior Manager in Strategy and Innovation for Law Firms at CT, reviews entity-related compliance obligations that law firms should address for their clients to prepare for the start of the new year.

Here, Ms. Suelzer discusses some of the triggers that can lead to new or additional compliance requirements for a business. Examples include a new product line, a second location, or changes in state law. She also talks about the increasing number of small and midsize businesses working internationally and the challenges in completing transactions with foreign jurisdictions that might not be expected.

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TRANSCRIPT

Greg Corombos: Hi, I'm Greg Columbus, our guest once again this week on Expert Insights is Marcia Suelzer. She is Senior Manager in Strategy and Innovation for Law Firms at CT Corporation. Today we’ll once again be looking at compliance issues that law firm leaders must be on top of in the final weeks of the year. Last week we talked about the compliance issues related to the entity that needs to be addressed. And this week we're taking a look at compliance issues related to how businesses are run. And Marcia, thanks so much for being with us again,

Marcia Suelzer: Thank you very much.

Greg Corombos: You explained why you need to be on top of so many different compliance issues for yourself and for your clients, and a lot of different moving parts, some of which is routine, but some of which is not—depending on what's happened in the past year, and maybe what's planned in the year to come. What if there are simple changes in the way business is being done? What does that mean in terms of compliance for you and your clients?

Marcia Suelzer: Yes, great question, Greg. And one of the things that so often law firms and the business owners themselves overlook is the fact that that small...what appears to be perhaps small changes can have a big impact. For example, if you're deciding to add a new line of products or services to your business, you may have a whole new area of business licenses that are required. Even something as simple as changing your operating hours might require you to file an update with a city, a state, a county locality in order to make sure your business is on track.

So it's important. Business licenses are an interesting area in that they can be so complex and highly nuanced that even online businesses are increasingly subject to business license requirements, and may now have to file to get a sales tax registration number in light of the Wayfair Decision.

So it's really helpful when you have a client as a law firm...has a client that is expanding that you could do a what we call a business license audit. And that would just take a look at the type of business and the location and really help you understand what licenses are needed and where to file those licenses, what forms to use and to give you a timeframe of how long it will take to get those licenses.

So if I'm opening a new location only a few miles from where my first retail store is, I will need a whole new set of licenses for that new county, city jurisdiction. And not applying for those in time can actually prevent me from opening. My grand opening might have to be delayed with all of the headaches around that.

So even if there hasn't been a big change, then it's important that the attorneys look at that. Also, you want to make sure that your business entity choice that you made still meets your client's needs. Nowadays with pass-through taxation, most companies are opting for an S corporation or an LLC, as corporations have specific requirements around how many members and what types of owners they can have.

So you always want to do a checkup to make sure that whatever requirements you have in place still are valuable for that client.

Another area that it's helpful to really work with a knowledgeable service provider on is changes in state law. Almost always, you can override default state requirements. So take LLCs, for example. In lots of states, they will default to either being member managed, which means everyone has a vote, or manager managed, which is much more like a corporate structure where one person makes the day-to-day decisions. You can almost always override that.

But if you've left silent a provision in your operating agreement about it, and your state law changes from one to the other, then you might find that it no longer is what your clients want.

So the year-end review covers, you know, a lot of examining the business as it's changed and also examining the law that as it's changed. And that's why it's helpful to work with companies that really spend the bulk of their time learning and understanding compliance requirements. An attorney may be juggling any number of things from client relationship building to looking at specific points of law and does not have the time to devote to keeping track of every single change in corporate compliance land.

So that's really the big factors that we look at at the end of the year, that a law firm should look at every year’s year-end. Is the business in good standing? Are the businesses’ licenses up to date? Are there any changes that are either occurred or that are being contemplated that are going to require filings?

And the one last thing I just want to mention quickly is a surprising number of small businesses and midsize businesses are now doing international work. And one thing it's important for every law firm to realize is at one level, it's like, of course, international law isn't the same as U.S. law. But more importantly, international business practices aren't the same as U.S. business practices. There are several countries where around the country's major holidays, everything simply shuts down. We close here in America, we’ll close maybe for Thanksgiving Day, which is coming up. But we wouldn't close for two straight weeks.

There are other countries that have very, very strict limitations on business hours and do not have expedited services. The state of Delaware is open for business until midnight. There are other countries where at 4:30, the office is closed. And that's that, until the next day.

So international matters require the same type of considerations as domestic, but also have that factor of knowing how the country operates as well as what its requirements are.

Greg Corombos: Real quick, if folks want help from CT, how can they find you?

Marcia Suelzer: Oh, they can always find us on the website at CT Corporation...I just want to point out, we've come out with a great infographic that is at CT.WoltersKluwer.com, so that's CT dot W O L T E R S K L U W E R, Wolters Kluwer dot com. And it is actually a pictorial infographic that leads people through a road to year-end success with road signs pointing out opportunities and pitfalls along the way,

Greg Corombos: Marcia good stuff. Thanks so much for your time today. We appreciate it.

Marcia Suelzer: Thank you very much.

Greg Corombos: Marcia Suelzer is Senior Manager in Strategy and Innovation for Law Firms at CT Corporation. I'm Greg Corombos. And for more information on this topic, please call CT at 844-787-7782.

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