Alan Insul, a Los Angeles lawyer limiting his practice to business, corporate, and real estate cases, offers some candid commentary about his law firms dealing with new economic realities.

It’s tough out there, even for lawyers. From major law firms to small firms, excess is being trimmed in order to better facilitate a nouveau climate urging more cautious business expenditures for legal advice. “The nation’s businesses are pulling in their collective horns beneath the juggernaut of our longest and deepest recession since the Great Depression,” asserts Alan Insul, a Los Angeles lawyer limiting his practice to business, corporate, and real estate cases, “I find that many clients are shedding large law firm representation and looking toward smaller firms for efficient and more cost-effective legal representation.”

A survey of the nation’s top 250 law firms bears out what Insul is saying. During the past year, these apex firms have shed 5,259 lawyers from their payrolls, a drop of 4%. This is the largest lawyer retention downturn since the National Law Journal began collecting such information in 1928 – just prior to the dismal Great Depression. Two other distinct declines, both in the neighborhood of 1 percent, were recorded during the early 1990s. One firm, Fried, Frank, Harris, Shriver & Jacobson lost 168 lawyers, a decline of 26.4%.

Other firms are cutting billing rates and pay for associates by up to 20%, primarily in response to clients’ concerns about cutting the costs of legal services.

“It’s a challenging marketplace we’re in now, and a changing one. Clients, in looking toward smaller firms, while not willing to sacrifice on quality, nevertheless are coming to appreciate that the smaller more nimble firm is by definition more flexible, and can very often handle most, if not all, of the same matters previously handled by larger firms,” Insul explains.

During the early 1930s and especially in mid-1937 during the so-called “second wind” of the Great Depression, lawyers too were embroiled in a bleak scenario featuring bread lines and soup kitchens, and a chronic lack of steady employment even for the most qualified and best trained among them. Nowadays, the outlook is more positive for lawyers, especially those willing to make some adjustments. “Making some of these adjustments can even lead many firms and their clients to a stronger business position overall,” Insul concludes.

To learn more, contact Los Angeles business attorney and California corporate lawyer, Alan M. Insul by visiting Insullaw.com.

Alan Insul, a Los Angeles attorney limiting his practice to business, corporate, and real estate, provides pertinent commentary on California Governor’s recent decision to veto a state bar membership dues bill that would have extended the State Bar’s authority to collect annual membership dues through 2010.

On October 13, 2009, Governor Arnold Schwarzenegger vetoed SB 641, which would have extended the California State Bar’s authority to collect annual membership dues through 2010. Schwarzenegger explained in his letter to Senate that he was returning the measure by Sen. Ellen Corbett, D-San Leandro, without his signature “because the State Bar cannot continue business as usual.”

While the State Bar has enough funds to continue functioning through 2009, Los Angeles attorney Alan Insul, who is limiting his practice to business, corporate, and real estate cases, says that the veto “seems a bit like overkill” and that a “compromise between the Legislature and Governor,” should be worked out soon.

The governor opined that “inefficiencies remain unaddressed” and that the State Bar maintained a “political agenda.” Governor Schwarzenegger also alluded to Sharon Elyce Pearl, the State Bar’s former director of real property, who was charged in April 2009 with one count of embezzlement and six counts of filing false tax returns in the Alameda County Court. She faces up to nine years in prison if convicted on all counts. The governor went on to reference the media leak of the Fifth District Court of Appeal Justice Charles Poochigian’s “not qualified” rating by the State Bar’s Judicial Nominees Evaluation Commission. Poochigian, a former Republican state senator representing the Fresno area, was nominated August 20, three days after the MetNews reported his rating in a column by Editor Roger M. Grace. Schwarzenegger said the commission “by failing to follow the law, damaged its reputation for impartiality and, in turn, the State Bar’s.”

“Some of the points made by Governor Schwarzenegger are difficult to argue with, and certainly possess merit, but the fact is, the State Bar should not be prevented from functioning as normally as possible next year,” Insul asserts, “while scrutiny of the State Bar is essential, so is the State Bar’s role in the state’s justice system, as the governor himself has acknowledged.”

“I’m sure that our State Bar will be reexamining the problems that the governor has noted, but we’re all hopeful that his veto has not placed our very system in any jeopardy,” Insul concludes.

To learn more, contact Los Angeles business attorney and California corporate lawyer, Alan M. Insul by visiting Insullaw.com.

Which business entity do I choose?

Your business has been doing so well you are amazed. For the last couple of years it has continued to grow despite the severe recession. You’re rather proud of the fact that you ran it on a shoestring budget too, and kept just enough employees to do marketing and fill orders. Now that business is beginning to show a profit and you can actually take money out of it instead of plowing it back into the venture, you are beginning to worry about the fact you’ve been doing business under a fictitious business name. It’s time to make a call to a business attorney and find out how personally exposed you are and what you may do to protect yourself from business liabilities.

The first thing you find out is that you have been running the business as a sole proprietor despite having registered a fictitious business name. What that means is you have personal liability for all the obligations and other liabilities of the firm. It gets worse yet. The debts you’ve shouldered are business rather than personal or consumer debts. Your lawyer explains many of the protections you enjoy from consumer debts like credit cards or installment purchases don’t apply when you incur the debt in connection with operating your business.

Not without some trepidation, you ask the attorney if there is anything you can do to change the situation because you don’t want to start all over since you have a success on your hands. Fortunately for you the answer is there are a number of options that will let you change your company from a sole proprietorship to a business vehicle like a corporation or limited liability company. If this is done correctly, you can change the form of doing business tax free as well.

The attorney explains incorporating a going business or organizing it into a limited liability company is permitted in California and if properly done, neither the IRS nor the California Franchise Tax Board will see it as a sale from you to the business. Specifically, you may be able to contribute the assets of your business to the limited liability company in exchange for your membership interest without it being viewed as a taxable sale between you and your limited liability company.

What do you choose? You find out that corporations are an older form of business entity with less flexibility of operation over the limited liability company, the more modern form of business entity. On the other hand, when you do business in California in a limited liability form, it may be subject to a gross receipt tax which can be significant for a small business – if gross income attributable to California is more than $250,000, the fee will be imposed from a low of $900 to $11,790 if the total gross income exceeds $5,000,000.

Both entities are in common enough use that for most small businesses, institutional lenders are available to provide financing. For many tax professionals, the potential gross receipts tax is reason enough to opt for the use of a corporation which elects to Sub-Chapter S status. The advantage of an S election is that it avoids taxation at the corporate level, permitting items of income and loss to flow through directly to you, the shareholder. What is most important about either form of doing business is that it affords protection against personal liability.

Your lawyer says that as a practical matter, many lenders and landlords require personal guaranties by the shareholders or members of small business corporations or limited liability companies. Finally, in order to transfer the business into the selected business entity, your lawyer will work through each of your business assets and liabilities transferring title from you personally to the new entity.

Some of your liabilities, such as bank loans, may not be so easily converted into company obligations, at least without an accompanying personal guaranty. The good news is that once completed and all customers, vendors and other creditors are given notice of the change, future obligations or liabilities should belong to the company and will not be yours. Unfortunately, you learn that the legal and accounting costs are significantly more when incorporating a going business, or contributing the assets of a going business to a new limited liability company.

It is easy to see that our friend would have been better served had he spent a little more in the beginning to save significant legal and accounting outlays later, not to mention the time he may have to devote to gathering critical business information so that the process can be completed……at least that is what this lawyer thinks.

Roni Balint writes for the Law Office of Alan M. Insul. The content contained within this feature is not intended as legal advice and does not constitute an attorney-client relationship. To learn more, contact Los Angeles business attorney and California corporate lawyer, Alan M. Insul by visiting Insullaw.com.

Assembly Bill 33 (AB33) is pending before the California legislature and would consolidate the Department of Corporations and the Department of Financial Institutions into a new Department of Financial Services, including an Office of Financial Consumer Advocacy.

AB 33 would create the Department of Financial Services (“DFS”), including an Office of Financial Consumer Advocacy, transfer the Department of Financial Institutions (“DFI”) to the DFS as the Division of Financial Institutions, transfer the Department of Corporations (DOC) to the DFS as the Division of Corporations, effective 2011, and transfer limited licensing and regulatory authority from the Department of Real Estate to the DFS in the Division of Corporations effective 2012.

While it may not seem like a ground breaking bill, or one that would ruffle feathers, it is a bill that has met with opposition from the Financial Institutions Committee, Business Law Section of the state Bar Association of California. This committee argued that the proposed changes would lead California’s banks and credit unions to move towards national charters, and thereby negatively impacting the health of the state chartered bank system.

The Financial Institutions Committee asserted that preserving dual banking is substantially benefited from an independent Department of Financial Institutions (DFI). The committee reasons that state bank policy makers, legal advisors and examiners are a major benefit to California banks and that suggested changes to Financial Code section 200(b) would greatly diminish their effectiveness. Furthermore, the committee feels that by blending the DOC and some parts of the Department of Real Estate and their various staff would result in a loss of current focus to the detriment of the dual banking system.

Another very real concern is the committee foresees that California state banks don’t have that much exposure as federally regulated institutions to consumer and commercial real estate, making them less subject to market risks. This in turn is attributed to the extremely knowledgeable DFI staff. It is that very knowledge and skill that has seen many of the banks self-reporting as they have an established a solid working relationship with the existing department. Changes to the existing structure would bring about bureaucratic delays and a loss of the existing candor with a possible loss of the successful regulatory stewardship.

Commercial banking in California is under a great deal of stress give the economic climate.
If during staff reassignments and downsizing the expertise to oversee the banks was lost or administratively distracted, then this too could spell disaster. With pending economic recovery for the banks just around the corner, any loss of guidance and expertise could slow this recovery down.

Further concerns deal with the observation that the proposed changes do not streamline the existing structure, but rather add to the bureaucratic layers, thus resulting in more money being spent to change the existing structure which would not improve it. It if isn’t broken, why try to fix it could prove to be a challenging question for the proponents of this bill.

The content contained within this feature is not intended as legal advice and does not constitute an attorney-client relationship. To learn more, contact Los Angeles business attorney and California corporate lawyer, Alan M. Insul by visiting Insullaw.com.

Looming on the horizon is an updated newly revised version of Ground Lease Practice; a practical handbook for lawyers dealing with the complexities of commercial ground lease situations.

Alan Insul, an expert Los Angeles business attorney, consulted on this latest version of Continuing Education of the Bar’s Ground Lease Practice in the complicated area of the rights between the parties in the event of a total or partial destruction of the improvements in situations such as a fire or earthquake. Continuing Education of the Bar is a joint enterprise of the University of California and the State Bar of California.

Commercial ground leases are when the owner of the land leases unimproved land to another party who will build and then own that commercial development. Leases for projects like this may run from 25 to 99 years. Unless the parties agree right up front in a ground lease agreement, the land owner winds up owning the improvements – a rather awkward state of affairs. “The transactions are very complex often involving the land owner, developer, lender and sometimes a large commercial user such as a major department store,” outlined Insul.

Drafting and negotiating solid, long-term ground leases may sound like a fairly straightforward issue. It is anything but straightforward and requires an expert attorney with a fine imagination and vision for the future. The future meaning the ability to balance the short-term goals of a client against a plethora of “what if” issues and conditions that may crop up in a real estate project 30 to 50 or more years down the pike.

It isn’t easy going in the beginning either when the attorney needs to be able to co-ordinate and keep track of the parties, title and interests involved; make sure there is a complete premises description; provide for term, termination and options to extend or buy and deal with issues pertaining to rent, security and other types of payments. “The issues are even more far reaching than that and will also include the not insubstantial matters of construction, maintenance, ownership of improvements, financing, subordination, encumbrances and problems relating to condemnation,” added Insul.

It’s interesting to note that there is the distinct possibility that a major project in Beverly Hills may possibly have more residual value at the end of a ground lease situation as compared to a project developed to provide commercial support for the re-development of a blighted community which may or may not succeed in the long-term.

“A project in Beverly Hills may be more likely to have residual value at the end of the ground lease rather than a project developed to provide commercial support for a redevelopment of a blighted community which may or may not succeed over the long-term,” said Insul.

The content contained within this feature is not intended as legal advice and does not constitute an attorney-client relationship. To learn more, contact Los Angeles business attorney and California corporate lawyer, Alan M. Insul by visiting Insullaw.com.

Things just got a bit easier for people who want to register a business in California. There are new regulations to help in the selection of names for a business entity.

Choosing a business entity is difficult enough as it is and the choices include an LLC, partnership, corporation, etc. Choosing a name for the business, while exciting and challenging, is even more difficult if the rules laid out by the Secretary of State (SOS) are not followed.

It would behoove those who are serious about launching a business that requires filing with the California SOS to do some homework and check the newest changes to the regulations before picking a company name and finding out it is not acceptable.

This isn’t an easy process and when a company is launched, the choosing of a name is a critical part of the whole process of being a “business.” In addition, the choice of entity and its name may have long-term tax and economic ramifications, respectively. “This is one of the major reasons speaking to a Los Angeles business attorney familiar with the SOS guidelines will assist a serious entrepreneur in ‘getting it right’ the first time when they go to register,” outlined Alan Insul, a noted Los Angeles business attorney with years of corporate experience behind him.

Perhaps the most important section that business entrepreneurs want to pay attention to is the “same or deceptively familiar names” section. In essence, it makes reference to the fact that if a name being proposed for filing with the SOS is highly similar to one that already exists, that name will be declined.

The name is too close to being the same if the name being suggested and an existing name are identical; if the differences between the suggested name and one that already is in existence merely rest on differences in use of letters and other graphical touches, or if the difference boils down to the presence or absence of a business entity ending. The SOS regulations provide good examples of what to avoid when choosing an entity name.

As with many areas of law, there are exceptions to virtually every regulation and it only makes sense to speak with a Los Angeles business attorney to get the full sense of how the regulations affect the launch of a proposed business. “In the meantime, it’s a good idea to do some pre-launch research to find out what pitfalls to avoid,” said Insul.

One other place a serious business entrepreneur may find solid information backed by years of experience is Chapter 3 in the 2009 edition of Selecting and Forming Business Entities. The two volumes will be available soon and also have a forms CD included. Respected Los Angeles business attorney, Alan Insul, authored Chapters 3 and 7 in this year’s edition. The material is specifically designed for California business lawyers working with their clients to help them choose the “best” entity for their business.

To learn more, contact Los Angeles business attorney and California corporate lawyer, Alan M. Insul by visiting Insullaw.com.

The content contained within this feature is not intended as legal advice and does not constitute an attorney-client relationship.

It was a long time coming, but now that the 90-day delay period is in play to forestall foreclosures, California homeowners may see light at the end of the tunnel.

June was a busy month in the offices the governor of California with some landmark legislation making its way onto the floor of the house. “Signed into law was an innovative act that will assist California homeowners in keeping homes facing foreclosure,” said Alan Insul, a well-known and respected Los Angeles business and real estate attorney.

Called the California Foreclosure Prevention Act, this legislation’s intention is to ensure affordable loan modifications for homeowners up to their ears in debt and about to lose their house. Governor Schwarzenegger proposed this particular act and it made its way into the state budget in February.

It’s interesting to note the strong “community minded” orientation of this act in addressing the needs of every Californian for a place to call home without fear of losing the core of their existence. “Foreclosures do a great deal of damage economically, not just to the family caught up in that desperate struggle, but to the neighborhood as a whole. Cumulatively speaking, the rate of foreclosures also depresses California’s economy and drastically affects their budget. It is hoped that this step will stabilize the downward spiral in housing, but only time will tell,” indicated Insul.

Without reinventing the wheel, the act bars a lender or mortgage service provider from filing a notice of sale for a further 90 days in addition to the current time limits, unless there’s a comprehensive loan modification program approved by regulators. The emergency regulations to get this act rolling were brought into play in June as well, and they outlined the criteria for the loan program.

The application process states lenders and service providers get a 30-day grace period from the 90-day foreclosure halt when they get a substantially complete application. If the loan modifications are approved, the person applying gets the 90-day foreclosure stay provided they follow the terms of the approved loan program.

Simply put, the loan modification act modifies the borrower’s loan terms by doing such things as changing the principle loan amount, changing the interest rate or amortization schedule, etc; things that get results – like a 38% debt-to-income ratio for the borrower. “The one fly in the ointment is that if the lender proves modifying the loan gives them a bigger loss than foreclosure would, the lender doesn’t have to offer a loan modification,” added Insul.

To learn more, contact Los Angeles business attorney and California corporate lawyer, Alan M. Insul by visiting Insullaw.com.

The content contained within this feature is not intended as legal advice and does not constitute an attorney-client relationship.