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Pitfalls of Single Members LLCs in Florida – Judgment Creditors Can Foreclose on Your Interest

Posted on Apr 11, 2016 in Complex Commercial Litigation

Disclaimer:  This article does not constitute an advertisement or legal advice and does not create an attorney/client relationship. The comments herein should not be relied upon by anyone who reads them. Limited liability companies (“LLCs”) have become one of the most popular types of entities used by businesses in Florida. Like a corporation, one of the primary purposes of the LLC is to shield the personal assets of members and limit liability for corporate debts and obligations to the assets of the company. However, the protection from personal liability is not absolute. For instance, an individual member is not shielded […]

Selling your Business through a Charitable Remainder Trust – a Win-Win for Taxpayers and Charities – Part 2

Posted on Mar 29, 2016 in Estate Planning

As discussed last month, Husband and Wife created a Charitable Remainder Trust (“CRT”), contributed their corporate stock valued at $5,000,000 to the CRT and the Trustee later sold the stock.  No capital gains tax was paid because the CRT is a tax-exempt entity.  Once Husband and Wife contribute their stock to the CRT, they are entitled to a current charitable income tax deduction against other income.  But their contribution was valued at $5,000,000, so why is their deduction only $500,100?  Why can’t they deduct the entire $5,000,000 value?  The charitable deduction is limited because Husband and Wife opted to receive […]

Florida’s Fourth District Test for Determining Whether Shareholders May Bring Direct Actions Against a Corporation

Posted on Mar 22, 2016 in Complex Commercial Litigation

In the recent decision of Strazzulla v. Riverside Banking Co., Florida’s Fourth District Court of Appeal (“DCA”) has adopted a two-prong test for determining when shareholders may bring direct actions in their individual capacity against corporations, as opposed to derivative actions on behalf of the corporation.1 In doing so, the Fourth DCA follows the Third DCA’s 2014 decision in Dinuro Investments, where that court held similarly. 2 In Strazzulla, a group of shareholders filed a complaint against two of Riverside Banking Company’s directors for negligent misrepresentation and fraudulent misrepresentation, and against Riverside Banking Company itself, under a theory of vicarious […]

Collecting Rent from Commercial Tenants in Bankruptcy

Posted on Mar 11, 2016 in Complex Commercial Litigation

A commercial tenant files bankruptcy and stops paying rent. What should a landlord do? One option is to immediately file a motion for payment of administrative rent. Unless a tenant is a large, newsworthy national chain, a landlord usually finds out about a tenant’s bankruptcy through a notice in the mail. Unfortunately, for most landlords this means the tenant stops paying rent as well. Fortunately, commercial landlords are protected under the bankruptcy code by a provision that provides for the debtor to pay administrative rent to the landlord. However, the payment of administrative rent is not typically an automatic process.  […]

Loan Originator Compensation Rule under Dodd Frank

Posted on Mar 3, 2016 in Real Estate

The Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act” or simply, “Dodd-Frank”) was enacted in July 2010 in response to the 2008 financial crisis. The Dodd-Frank Act created the Consumer Financial Protection Board (“CFPB”) as the primary regulatory body empowered to enforce new and existing lending regulations. In addition to enforcing new and existing lending regulations, the CFPB was designed to educate consumers and study the financial services and markets. One of the CFPB’s first endeavors was to enact the Loan Originator Compensation Rule (the “Rule”), which implements Dodd-Frank’s requirements, as set by Congress. The Rule functions […]

The Delaware Rapid Arbitration Act: Possible Panacea or Potential Pitfall?

Posted on Feb 26, 2016 in Complex Commercial Litigation

Arbitration is often believed to be a great alternative to litigating a dispute in state or federal court.  Faster, cheaper, and more definitive.  No lengthy court dockets.  No expensive, never-ending discovery.  And no lengthy appeals.  Right?  Well, not always. Although arbitration has been lauded as solving many of the problems associated with litigating in the courts, in practice arbitration often has its own set of potential pitfalls which may include:  litigating over whether the parties’ arbitration agreement applies and the scope of arbitration, disputes over the selection of the arbitrators, extensive discovery  similar to that faced in litigation, delays in […]

Internal Revenue Code Section 1031 Tax Deferred Exchange (Part I)

Posted on Feb 19, 2016 in Real Estate

An opportunity to defer taxes and build wealth arises when and individual or entity sells an investment property for more than he or it purchased it for. Generally, tax on the seller’s capital gain is due upon the sale of property. However, Internal Revenue Code Section 1031 provides an exception to this rule and allows a seller of investment property (referred to here as the “Relinquished Property”) to re-invest his proceeds into another investment property (referred to here as the “Replacement Property”) as part of a qualifying “like-kind” Exchange. Often misunderstood by taxpayers, capital gain deferred in an Exchange is […]

Contract Damages in Florida – Avoiding the “Overhead” Trap

Posted on Feb 19, 2016 in Complex Commercial Litigation

A party suing for lost revenue under a contract in Florida must deduct a portion of its general “overhead” expenses when calculating its damages. A plaintiff who is unaware of key aspects of this requirement could easily overestimate its potential recovery in breach of contract lawsuit—or, worse, unwittingly stumble into an evidentiary “trap” that might severely limit their recovery at trial. A plaintiff typically seeks to recover damages based upon the net benefit it expected to receive under the contract. If the plaintiff has not performed some or all of its obligations under the contract, the damages will generally be […]

FLSA Settlements and Obtaining Binding Releases

Posted on Feb 19, 2016 in Complex Commercial Litigation

Originally enacted in 1938, the Fair Labor Standards Act (FLSA) was written to “protect all covered workers from substandard wages and oppressive working hours, ‘labor conditions [that are] detrimental to the maintenance of the minimum standard of living necessary for health, efficiency and general well-being of workers.”1 Employers facing FLSA litigation will sometimes turn quickly to settlement negotiations with former employees to minimize the costs of litigation.  However, the private settlement of FLSA disputes requires careful consideration. The purpose of settlement is to reach an agreement that resolves a pending legal dispute once and for all. Outside the FLSA setting, […]

Do Minority Shareholders Ever Owe A Fiduciary Duty of Loyalty and Care to the Corporation and/or Other Shareholders?

Posted on Feb 19, 2016 in Complex Commercial Litigation

It may seem surprising to many that Florida law has not clearly prescribed by statute or otherwise what duties, if any, minority shareholders may owe to the corporation and/or to other shareholders.  While minority shareholders in publicly traded or held corporations usually do not owe the same fiduciary duties of loyalty and care owed by officers and directors to the company and to its shareholders, what duties are owed to whom becomes much less clear in the context of closely held corporations. A closely held corporation usually has no publicly traded market for its stock and often is owned by […]