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The IRS has released proposed regulations under Section 1411 of the Internal Revenue Code, which imposes a 3.8 percent tax on certain unearned income or investments of certain individuals, trusts and estates, for tax years beginning after December 31, 2012.Continue Reading Proposed Regulations Explain 3.8 Percent Medicare Tax on Net Investment Income
CONTRIBUTED BY
Asher Bearman
asher.bearman@dlapiper.com
Earlier this year, I wrote about an opinion from the Delaware Court of Chancery that, if affirmed, could have broad practical implications for LLC managers and the fiduciary duties owed to their members. We have been monitoring this case and, on November 7, the Delaware Supreme Court issued its decision. As it turns out, whether fiduciary duties are owed by default in a Delaware LLC remains an open question. The Delaware Supreme Court affirmed the earlier Chancery Court’s opinion exclusively on contractual grounds, leaving open-ended the question as to default fiduciary duties by rejecting the Chancery Court’s decision to incorporate fiduciary duties into the Delaware LLC Act. Please continue reading below for the text of DLA Piper’s follow-up Client Alert posted by John Reed and Jennifer Lloyd.Continue Reading Default Fiduciary Duties in Delaware LLCs Remains an Open Question following Delaware Supreme Court Ruling
As the new year approaches, taxes will again be front and center in shaping strategy for both actions before year-end and 2013 financial planning. This year is no exception, and in fact the prevalence of tax as a driver will be magnified given several major tax changes that are set to take place at year-end absent action by Congress. Merrill Lynch did a nice job of concisely summarizing the major tax changes here (“Tax law changes call for careful planning in 2012”). Also see our earlier post on
Continue Reading Summary of 2013 Tax Changes
CONTRIBUTED BY
Asher Bearman
asher.bearman@dlapiper.com
The Washington Department of Financial Institutions (DFI) issued a Notice to all interested parties that its Securities Division intends to propose amendments to its rules for investment advisers. Significantly, these rules could significantly change the regulatory landscape for investment managers operating in Washington State. In speaking with state regulators and reviewing the release, I understand that DFI currently is in the process of surveying fund managers. If you have been contacted by DFI to complete this survey but you are not a registered investment adviser, I would very much like to hear from you as it’s not clear to us exactly who is part of the DFI analysis.Continue Reading Washington DFI Announces Possible Amendments to Investment Adviser Rules
The SEC yesterday proposed rules to permit general solicitation and general advertising in Rule 506 and Rule 144A offerings. A main requirement is that the issuer “takes reasonable steps to verify” that the purchasers are accredited investors. The model the SEC has proposed would neither mandate specific verification steps nor assure issuers and investors that adequate steps have been taken. The model will likely require issuers to obtain reliable third party information most of the time, rather than relying on questionnaires, contractual representations, or similar confirmations from a purchaser.
Continue Reading SEC Proposes General Solicitation Rules
CONTRIBUTED BY
Asher Bearman
asher.bearman@dlapiper.com
Tax planning can be challenging at any time of year, but this year may be more challenging than normal. As with any presidential election year, there is a lot of legislative uncertainty leading into 2013. Adding even more fuel to the fire, there are a number of significant tax rate changes scheduled to occur at the end of 2012 unless Congress steps in with a last-minute change. Given the election year, an affirmative action by Congress seems very unlikely prior to November, which could result in last-minute planning
CONTRIBUTED BY
Asher Bearman
asher.bearman@dlapiper.com
Crowdfunding may provide an interesting way for some companies to raise capital. It’s definitely getting a lot of the hype since passage of the Jumpstart Our Business Startups (JOBS) Act earlier this month. I’ve read articles talking about how crowdfunding is going to disrupt funding for small businesses (in a good way). Personally, I don’t see it…certainly not in the short-term. Perhaps the SEC’s pending rulemaking will make this an amazing option, but right now I’m not sure that otherwise financeable companies will find this option better than the other existing methods. The currently projected costs are simply too great. The process is expensive both initially in setting up the intermediary/crowdfunding process itself (vs. dollars raised) and also on an ongoing basis in terms of shareholder maintenance. Add to that the likelihood that crowdfunded companies, at least early on, probably will be targeted by plaintiff class-action lawyers, possibly based on nothing more than the fact that the concept is new and untested. SEC rulemaking is scheduled for 270 days from passage but may take even longer. Until then, anyone trying to setup a crowdfund will be doing so at their own peril, without an understanding of the rules that may apply to them retroactively. In short, for private companies, crowdfunding remains an enigma and all we reasonably can do for the rest of this year is debate its merits.
For fund managers, however, the implications of crowdfunding are already clear – you can’t use it.Continue Reading You Cannot ‘Crowdfund’ a Fund (in case you were wondering)
Just a reminder to those who have Delaware corporations, your annual report and franchise tax payment are both due on March 1. At this point, you should have already received from Delaware your notification of annual report and franchise tax due, which is sent to a corporation’s registered agent in December of each year (although sometimes it does not arrive until January). Delaware requires these reports to be filed electronically.
As you will notice, there are two methods that you can use to calculate the amount of Delaware franchise tax due for your corporation (i.e., the “Authorized Shares Method” and the “Assumed Par Value Capital Method”), which result in vastly different amounts due. The default payment amount listed on your notification is set by Delaware using the Authorized Shares Method, which method will almost always result in a much high amount due for startups with limited assets. The minimum franchise tax is $75 and the franchise maximum tax is $180,000.
Here are some examples showing how the different methods can dramatically impact the amount of Delaware franchise tax due:Continue Reading Delaware franchise tax due March 1: two methods of calculation, two vastly different results
CONTRIBUTED BY
Asher Bearman
asher.bearman@dlapiper.com
Fund managers have a lot of new things to worry about of late. March 30, 2012 is only six months away. That’s when investment advisers can expect to be obligated to comply with the new regulatory regime imposed pursuant to the Dodd-Frank Act (which we’ve covered extensively), all fund managers will become subject to the SEC’s examination authority. The SEC has indicated that it will not be conducting routine examinations of fund managers who are exempt from registration under the new rules, as either VC fund managers or as smaller/private fund managers, but all fund managers could be the subject of a targeted SEC inspection (as the SEC may conduct an on-site visit if it determines that is warranted).
Most private fund managers will not be experienced with SEC reporting or with potential SEC inspections. What should they do to prepare? Perrie Weiner, Joshua Briones and Stephanie Smith, litigation attorneys with DLA Piper, expore the option of a mock interview:Continue Reading SEC May Inspect Fund Managers – How to Prepare
CONTRIBUTED BY
Tyler Hollenbeck
tyler.hollenbeck@dlapiper.com
In my earlier post regarding considerations when creating your option plan, I briefly referenced the tax advantages, from the recipients’ perspective, of “incentive stock options” (ISOs), which can only be granted to employees, relative to so-called “nonqualified options” (NQOs), which can be granted to employees or consultants. Although there a number of web resources regarding the distinctions between ISOs and NQOs, these resources are often heavy with tax jargon and thus poorly understood. Accordingly, we have put together the below quick reference guide, which is intended only as a high-level summary of the current US federal tax consequences.Continue Reading Incentive Stock Option Plans – ISOs vs. NQOs
