Other Videos of Interest

Other Videos of Interest

As real estate attorneys here in NYC, we structure, draft, and negotiate real estate transactions involving foreign purchasers, to help avoid U.S. estate and gift taxes and minimize income taxes.  If you are a foreign national buyer or investor in real estate or looking to purchase a New York condo, coop, townhouse, or other real property, click here to read our Foreign Real Estate Investor’s Guide. Simple planning and corporate structuring can help a foreign investor avoid millions of dollars in U.S. estate and gift taxes and income taxes.

Click here to read our Foreign Real Estate Investor’s Guide: Simple planning and corporate structuring can help a foreign investor avoid millions of dollars in U.S. estate and gift taxes and income taxes.

(April 15, 2011) Today, online gambling sites PokerStars.com, Fulltiltpoker.com, Absolutepoker.com, Ultimatebet.com and ub.com were shut down by the FBI. The founders of these sites were charged with money laundering, bank fraud, and illegal gambling offenses as part of criminal scheme to bribe or trick banks to in order to garner billions of dollars in illegal gambling profits.

The companies laundered money taken in from U.S.-based gamblers disguised as payments to hundreds of dummy online merchants (claiming to sell items like jewelry and golf balls). Then the companies tricked banks into processing the illegal profits as payments for the goods.

The poker companies, once they suspected larger banks were on to their scheme, eventually convinced several small failing banks to process the payments in exchange for multi-million dollar investments in the banks (one such bank allegedly accepted a $10M investment).  The principals involved face years in prison and $3 billion in civil money laundering penalties and forfeiture.  The most serious charges, conspiracy to commit bank fraud and wire fraud, carries a maximum sentence of 30 years in prison and a $1 million fine.

It is illegal under the 2006 Unlawful Internet Gambling Act for gambling businesses to knowingly accept payments from U.S. players. Although these online poker site companies were located offshore, they nevertheless operated throughout the United States. Generally, under federal and state gaming laws, it is illegal to operate “games of chance” (like a lottery or card games) as opposed to a game of skill.

As internet lawyers, we get quite a number of calls asking what kinds of online games and contest are legal.  Online gaming is illegal unless it is a game of skill. A 4-prong test called the dominant factor test is commonly used by the courts to determine whether an online game is a game of skill or a game of chance (games of chance are generally illegal):

• Players must have a distinct possibility of exercising skill and must have sufficient information upon which to calculate an informed judgment. The test is that without skill, it will be absolutely impossible to win the game.
• Players must have the opportunity to exercise the particular skill and the general class of players must possess the particular skill. If the game or contest is targeted for the general public, then the average person must have the particular skill (but not every person need such skill).
• The standards of skill (i) must be known to the players and (ii) must govern the result; and the winners must be objectively (not subjectively) determined.
• Skill, and not chance, must control the final result, and cannot be a part of the larger scheme. If chance enters into any part of the game or contest and if chance proximately influences the final result, then the scheme is a lottery, which is generally illegal.

**This post is for informational purposes only, For legal advice contact an internet lawyer**

It is near impossible to run a business without using technology and having access to email and the Internet.   You may even employ cloud computing, software-as-a-service (SaaS), social networks like Facebook and Twitter to be more productive and increase your business’ visibility. Be careful – implementing technology in your business can create challenges and potential liability!

I am often asked what things should be included in an employee manual or acceptable use policy.  Employers should consider adding an acceptable use policy (AUP) to your employee handbook.  (No company is too small to have an employee handbook – it sets out the “rules of the road” of the company’s expectations of its employees’ conduct, protecting company trade secrets and confidential information, explaining human resource matters and vacation policies, and prohibition on sexual harassment, etc.).

• The acceptable use policy sets forth the expectations of what is the acceptable use of the company’s technology – from the computers and fax machines, to the use of the Internet and email. It also should address computer security, copyright infringement and defamation/slander.
• The AUP should be written in a way to protect the company form rogue employees as well as protecting the employees’ right to free speech and privacy.  Many companies are concerned with their employees’ use of the internet (and go so far to install monitoring and filtering software or appliances, which may not be appropriate for your company).  At the end of the day, the AUP should protect the company’s best interests.

Consider the following that you may want to address in your AUP:

• Do you have a valid business reason to monitor your employee activities?
• Is there certain company information that needs to be protected or kept confidential?
• Can you identify which employees that have a “need to know” sensitive data?
• What measures does your company have in place to address disaster recovery, back–up and physical and network security (data encryption, password policies, etc.)?

With respect to respecting your employees’ privacy, generally, email and internet activity may be monitored for valid business purposes (note, each state may have their own privacy laws). So, subject to your state’s laws, it is recommended that your employee’s consent in writing to having their email and internet activities monitored (and perhaps include procedures for when you may disclose email data files to third parties (e.g., as required by law or pursuant to a court order)).

Employee Internet Access

Your employees probably need internet access to support their job functions, but their use for non job-related activity can expose your company to liability.

• It is wise to prohibit employees’ from accessing porn or adult web sites in your AUP (or use filtering mechanisms). If an employee visits a porn site from the workplace, then your company might be found guilty of facilitating a “hostile work environment” under sexual harassment laws. A forensic expert could find the porn sites’ “cookies” on the hard drive that could be used as evidence in a sexual harassment or employment discrimination lawsuit. Internet use should be limited to company-related activities.

An E-Mail Is Not Like A Phone Conversation

People need to treat their e-mail messages more like a written letter than a phone conversation. You need to keep in mind that an email message can be permanently stored (and can haunt you later if retrieved for litigation) and can be easily disseminated with a press of the “forward” button. As seen all too often on the nightly news, e-mail and text messages have contained the most damning evidence in sexual harassment and employment discrimination lawsuits.

The email AUP needs to:

• prohibit email messages that contain any type of offensive, harassing, fraudulent, defamatory, or otherwise illegal language. Perhaps employees should get a personal email address outside of work (like gmail), and you should decide whether your company wants to permit the use of work computers for the employee’s occasional sending or receiving personal email during work hours.
• address company confidential information, trade secrets and communications of client information (you might prohibit any transmission of same unless using encryption technology).  Also, your company may be governed under federal or state privacy laws like HIPAA or Graham-Leach-Bliley, which governs the use and disclosure of personally identifiable information.
• address downloading of email attachments (virus risks, copyright issues, etc.)

Lastly, you should consider including in the AUP possible disciplinary actions which may be brought against an employee in the event the AUP is violated (perhaps ranging from a warning, to loss of Internet, or even termination).

**This post is for informational purposes only, For legal advice contact a business and technology lawyer**

But what happens when you decide to post that picture on the Internet – perhaps on Facebook or Twitter (using Twitpic), or some other social network or photo-sharing site?

You may be shocked to find out that once you post on these sites, that although you still “own” the photograph, you grant the social media sites a license to use your photograph anyway they see fit for free AND you grant them the right to let others use you picture as well! This means that not only can Twitter, Twitpic and Facebook make money from the photograph or video (otherwise, a copyright violation), but these sites are making commercial gain by licensing these images, which contains the likeness of the person in the photo or video (otherwise, a violation of their “rights of publicity”).

Facebook

Under Facebook’s current terms (which can change at anytime), by posting your pictures and videos, you grant Facebook “a non-exclusive, transferable, sub-licensable, royalty-free, worldwide license to use any [IP] content that you post on or in connection with Facebook (“IP License”). This IP License ends when you delete your IP content or your account unless your content has been shared with others, and they have not deleted it.”  Beware of the words “transferable, sub-licensable, royalty-free, worldwide license.”  This means that Facebook can license your content to others for free without obtaining any other approval from you!  You should be aware that once your photos or videos are shared on Facebook, it could be impossible to delete them from Facebook, even if you delete the content or cancel your account (the content still remains on Facebook servers and they can keep backups)!  So, although you may be able to withdraw your consent to the use of photos on Facebook, you should also keep in mind that if you share your photos and videos with Facebook applications, those applications may have their own terms and conditions of how they use your creation!  You should read the fine print to make sure you are not agreeing to something that you don’t want to have happen.

Twitter

Twitter’s photo sharing service, Twitpic, just updated their terms of Service on May 10, 2011 (which, of course, can and will be updated at any time, from time to time).  By uploading content using Twitpic, you are giving “Twitpic permission to use or distribute your content on Twitpic.com or affiliated sites.”  You are also granting “Twitpic a worldwide, non-exclusive, royalty-free, sublicenseable and transferable license to use, reproduce, distribute, prepare derivative works of, display, and perform the Content in connection with the Service and Twitpic’s (and its successors’ and affiliates’) business, including without limitation for promoting and redistributing part or all of the Service (and derivative works thereof) in any media formats and through any media channels.”

The terms go on to state that you also grant “each user of the Service a non-exclusive license to access your Content through the Service, and to use, reproduce, distribute, display and perform such Content as permitted through the functionality of the Service and under these Terms of Service.  The above licenses granted by you in media Content you submit to the Service terminate within a commercially reasonable time after you remove or delete your media from the Service provided that any sub-license by Twitpic to use, reproduce or distribute the Content prior to such termination may be perpetual and irrevocable.”

Twitpic/Twitter is probably more problematic than Facebook — They can sell your images and videos if they want!

First, there is no definition of “Service” on their site (they need to find a more detailed oriented internet attorney to draft their terms (Twitpic, call me)), so your photo could be used throughout the Internet.  More troubling is that your photos and videos may be reprinted and used in anything without your getting paid a dime – books, magazines, movies, TV shows, billboards – you get the picture!

Second, Twitter can create derivative works from your creations.  A derivative work is anything that is built upon your work (like adding your video to a TV show, putting your photo in a montage, etc.).

Third, even after you delete your photos from Twitpic, Twitter and Twitpic can still use your creations for a “reasonable” amount of time afterwards.  So what would be a reasonable amount of time to continue using your photo after you terminate the “license” if your photo or video is incorporated by Twitter or Twitpic in a larger work — perhaps forever if it would cost them money to remove!

Lastly, since Twitter/Twitpic can grant others to use your photos (and make money from it without paying you (remember the nasty word “royalty-free”)), even if you terminate your Twitter/Twitpic account, the rights they grant to others can never be terminated! Twitter has a deal with World Entertainment News Network permitting them to sell Twitpic content with no money to you!

Celebrities and celebrities-to-be, beware!  Your right to publicity (e.g. your right to get paid when others use your name, likeness, voice for commercial gain like product or sports endorsements) is stripped away each and every time you post on Twitter!  You or your intellectual property attorney should read the fine print before you post your photos or videos on Twitter or Facebook!

**This post is for informational purposes only, For legal advice contact a media/IP lawyer**

A summary of the new law is as follows:

• As a temporary measure, for calendar years 2011 and 2012 the Federal Estate Tax Exemption amount is 5 million dollars for persons dying during those years.

• The highest estate tax bracket will be 35%.

• Estate taxes remain a lien on real property for 10 years from the date of death.

• A surviving spouse can continue to convey free of the lien of estate taxes to a purchaser for value.

• As a temporary measure, the step-up in income tax basis has been continued for persons dying in 2011 and 2012 will go to the heirs, and give them a cost basis that is equal to the fair market value at the time of death.

• Raises the lifetime gift tax exemption to 5 million dollars for gifts made after January 1, 2011.

• As a temporary measure, the minimum gift tax rate during 2011 and 2012 is 35%.

If you have any questions about how the Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010 impacts your finances, you should speak with your financial planner or tax advisor.

Generally, a Limited Liability company (an LLC), is the proper entity to hold investment real estate.

• Like a corporation, the members’ liability is limited to their capital investment (absent any contractual personal guaranties).  Structured properly, liability incurred on one property will not impact other real estate that is owned.

• An LLC can elect to be taxed as a partnership – with the profit and loss of the investment passed through to the members’ individual tax returns.

• An LLC has less legal formalities than other corporate structures. See my article, “Why Choose a Limited Liability Company (LLC) over a Corporation For Your Small Business?“

• There are numerous advantages in using an LLC for Section 1031 tax deferred exchanges and for estate planning.  For instance, if properly structured, the value of a gifted LLC membership interest could be done at discount (e.g., a controlling interest has greater intrinsic value over a minority interest).

You should consider hiring a New York real estate lawyer early in the process.  He or she will work closely with your tax and financial advisors to help structure your investment real estate holdings in the best way possible and can guide you through the real estate buying process by preparing and negotiating the real estate broker agreement, drafting the contract of sale, negotiating lender agreements (notes and mortgages), IRS Section 1031 exchange planning, among other things.

**This post is for informational purposes only, For legal advice contact a business and commercial real estate lawyer**

Protect your blog and website from copyright infringement lawsuits.  Someone found guilty of willful infringement can be liable for statutory damages of up to $150,000 per infringement as well as attorneys’ fees and legal costs.

However, under the Digital Millennium Copyright Act, online services providers, blogs and websites can be shielded from copyright liability for other users’ posted content, if, among other things, the online service provider / website (1) has designated an agent to receive notifications of claimed infringement (also know as “takedown” notices) by registering contact information with the Copyright Office and by posting such information on the service provider’s website in a location accessible to the public and (2) promptly remove infringing material at the request of a the lawful copyright holder.   This is known as the safe-harbor provisions.  See §512(c) of the Copyright Act.

Once a website receives a compliant notification of claimed infringement, it must expeditiously try to remove, or disable access to, the allegedly infringing material, in order for the service provider seeks to receive the benefits of the safe harbor provisions.   A website is not required by law to remove the allegedly infringing material – but note that by receiving such notice, and not removing the claimed infringing material, the website may be secondarily liability (contributory infringement) for continuing to host the allegedly infringing material.

If you are an online service provider, host a blog, or run a website that allows users to post content, you should register a DMCA agent by completing a DCMA agent form (found here) and sending the completed form along with $105 to Copyright RRP, Box 71537, Washington, D.C., 20024.  If additional, alternative names are filed with the Copyright Office, each group of 10 alternative names (or fewer) adds an additional fee (currently $30), to the $105 basic filing fee.

Once registered, the website is then listed on the Copyright Office’s Directory of Service Provider Agents for Notification of Claims of Infringement so that in the event of an infringement, you want to make it easy for the legitimate copyright holder to find the online service provider and know where to send a takedown notice.

If you have any questions about filing an agent registration or if you have questions about possibly infringing content or have received a takedown notice, you should contact an Internet Attorney.

Your business acquisition attorney is not only your legal expert, but also will facilitate the business purchase process.  Your business lawyer will coordinate the processes, interface with all the players, and move the business transaction along, culminating in a successful closing.  As your legal expert, your business lawyer will conduct the legal due diligence, negotiate, draft and review the necessary legal documents, and should be intimately familiar with the legal intricacies aspects of your business purchase — keeping abreast of the facts and circumstances of the deal and advise you on any resulting legal consequences, and preparing the strategies to avoid legal problems.

1.  Of course, the first step in buying a business is to find a business to buy.

You can find businesses to buy in the classified section of most metropolitan newspapers, on those newspapers’ websites, in the Wall Street Journal, through your own networking efforts – whether in person or on the internet (like LinkedIn or Facebook), or through business brokers.  Corporate lawyers generally do not sell businesses unless they act as a broker or finder or happen to know a client or acquaintance who wants to sell a business.  There are tons of businesses for sale — the question is whether acquiring the business makes economic sense (and is the right business for you).

After you have identified the possible acquisition target, you (with the assistance of your corporate attorney) need to conduct due diligence on the business (investigate the business, its contracts, customers, financial reports, among other things) and determine what the business is worth and the terms of the purchase.  These steps are not mutually exclusive, they are interdependent and occur simultaneously — as you find out facts about the business, these may reflect on the business terms of the deal.

2.  The “Term Sheet” — Negotiating the Business Terms of the Purchase

While you are conducting due diligence on the business you intend to buy, you should begin negotiating the terms and conditions of the purchase of the business. This high level “term sheet” outline, would sufficiently detail (without necessarily including all the legalese), some of the following items, among others:

The parties to the business transaction;

Is the transaction to be structured as a stock purchase (buying all of the assets and liabilities of the business) or only purchasing certain assets of the small business (real estate, accounts, intellectual property, among other assets);

The purchase price and what assets or stock is being purchased;

The timing of the payment of the purchase price (lump sum or in installments);

If payment is installments, the amount of the down payment and the interest rate, and the collateral securing the note (also consider conditions to repayment (e.g., only from profits);

Binding and non-binding terms; and

Confidentiality obligations.

The “term sheet” (also known as a “LOI,” “letter of intent,” “MOU,” or a “memorandum of understanding”), which could be as short as a page or two, should expressly state that certain obligations are non-binding on the parties.  You may want to state that either party could walk away from the deal if they change their mind (maybe after a no-shop period), but you might want to make certain terms binding like reimbursement and confidentiality obligations.  As that the stock purchase agreement or asset purchase agreement will be drafted from the term sheet, you need to be as specific as possible with respect to contingencies to closing, offsets to the purchase price and other obligations (it will be hard to convince the seller to agree to terms in the resulting agreement differing from the deal points already agreed upon in a term sheet).

You should consult a business attorney at some point during the drafting of the term sheet (even if the first draft of the term sheet is prepared by the business person, you should have your business attorney review and/or negotiate it before it is signed).  Please see my post “Negotiating the Terms of the Deal — Buying or Selling a Small Business In New York” for a more detailed discussion about putting together a term sheet.

3.  Conducting Due Diligence

Due diligence is the process of thoroughly investigating the business being acquired.  The outcome of your business due diligence may very well impact the price you are paying and other terms and conditions of the term sheet.  You will want to have your financial advisor review prior years’ tax returns and financial reports.  You should have your business lawyer review all major contracts (including leases) to see if there are any “atomic bombs” that may be triggered by the sale of the business or that have any surprise obligations or rights (balloon payments, rights of first refusals, right to terminate, rights of consent, etc.).  If the business owns or leases real estate you want to review all documentation, leases, surveys, and environmental reports (or order one if there is a possibility that the business in question (or its predecessors) might have contaminated the land.  Read “How to Conduct Due Diligence for a Merger or Purchase of a Business“, for more details and a checklist of some due diligence items that should be reviewed by you and your corporate attorney.

4.  Preparing the Proper Documentation for the Business Purchase

There are many documents needed when transferring a business: the stock purchase agreement or asset purchase agreement, assignment and assumption agreements, deeds, consents, tax filings, among others.  You should consult a New York business attorney to negotiate, draft and/or review these instrumental agreements and documents which are necessary to transfer the business.

The most important document in a business sale is the “purchase agreement” (also known as the “sales agreement” or “acquisition agreement”) — and will be in the form of a stock purchase or asset purchase.  To protect yourself as the buyer, your attorney should prepare the first draft of this document. Otherwise, if the seller’s attorney prepares the sales agreement it can be one-sided, or worse yet, if the attorney is not too experienced, it might not cover the terms and conditions to the business sale that properly encompasses the complexity of the business or transaction.

Once the purchase agreement has been finalized, your business attorney can prepare the “closing checklist” of all of the consents, documents, filings, and agreements that need to be prepared and executed, and a list of all contingencies that need to occur on or before the “closing.”

5.  The Closing of the Business Purchase

Generally, the closing consummates the transaction (unless of course, there are post closing obligations to occur).  At the closing the parties and their corporate attorneys get together to exchange money and property, sign documents, and handle the remaining paperwork.

If you are considering a buying a small business in New York, make sure to check with your accountant and/or tax adviser and a New York Business Lawyer.  There may be important tax and other legal consequences to consider before making the decision.

The problem was that Google Buzz violated Gmail users’ privacy by automatically enrolling Gmail users in Google Buzz and publicly exposing private user data.  Within weeks following Google’s launch of Google Buzz, a class-action lawsuit was filed claiming that Google Buzz violated the Computer Fraud and Abuse Act of 1984 (CFAA) (In re Google Buzz User Privacy Litigation, Case No. 5:10-cv-00672-JW).  CFAA protects individuals from hackers, Trojan horses, and other software and devices that could compromise the confidentiality of data stored on a computer.  One of the problems with Google Buzz was that initially Gmail users had no way of opting out of disclosing their personal computer connections.  A common complaint of Gmail users was that  their email recipients were not necessarily the same people they may want in their social networks.

Yesterday (November 2, 2010), Google contacted millions of its Google Buzz users notifying them that it had settled the class-action lawsuit.

In accordance with the settlement, Google will establish an $8.5 million “Common Fund” to “fund organizations focused on Internet privacy policy or privacy education” (and pay the plaintiff’s lawyers’ fees and other expenses) and promised to “do more to educate users about the privacy aspects of Google Buzz.”  More information about the settlement can be found at http://www.buzzclassaction.com.

What is the impact of the settlement on Gmail Users?  Basically it has no monetary impact.  Gmail users will not receive any compensation from the settlement.

In accordance with the settlement found at www.buzzclassaction.com, Gmail users have 4 options:

• Opt out of the settlement (your notice must be received by December 6, 2010).
• Object to the Court about why you do not like the Settlement (objection must be received by January 10, 2011).
• Go to a hearing and ask to speak in Court about the fairness of the Settlement (your written Notice of Intent to Appear must be received by January 10, 2011).
• Do nothing and give up your rights to sue Google, thus accepting the terms of the settlement.

**This post is for informational purposes only, For legal advice contact an internet lawyer**

Some scenarios are obvious — you should call a criminal or corporate attorney when you’re being investigated by government officials for tax or securities fraud, when an employee is injured on the job or when a customer is injured by one of your products.

But you should also consider hiring a corporate attorney in other situations, like:

• When you are starting a business.
• When you are buying or selling a business.
• When you are considering dissolving your business.
• When you are hiring senior or key employees.
• When you are hiring employees with access to company secrets or confidential information.

When You Probably Need a Business Attorney

Here are a few examples of when you should consider hiring a good business attorney for your large business or small business.

• The members of your LLC, shareholders of your company, or partners of your partnership want to allocate the profits and losses is a special way in the LLC operating agreement, shareholder agreement or partnership agreement.
• The business partners will be contributing capital other than cash to the partnership, company, or LLC — like intellectual property, know-how, or appreciated property.
• In connection with the purchase of a business that has significant potential liabilities like: environmental issues (state and federal environmental laws impose liabilities on landowners in the chain of title, regardless if they caused the contamination); product liability, employee liability (sexual harassment or employee discrimination claims); excessive debt; or special capital calls.

Please note.  If you are a member of a limited liability company, a shareholder in a closely held company, or a partner in a partnership, keep in mind that the company lawyer is representing the company, not you.  There are times when members, shareholders or partners decide to form their business or eventually go separate ways.  The corporate attorney hired for the business has the business as its client and protects the business’ interests.  In the scenario of forming the business, each business partner has its own interest in mind, which may be adverse to the proposed company (for example, if one member is contributing intellectual property to the new business, it may want to have an exit strategy to keep its intellectual property if they part ways).  Or in the event of a “business divorce,” where the remaining members, shareholders or partners are buying out other LLC members, company shareholders or partnership partners, the company lawyer has the company’s best interest in mind, which interest is adverse to the departing business partners.  Business partners, members and shareholders should be represented by their own corporate attorney to avoid conflicts of interest, or at the very least, the business lawyer needs to advise the partners of, and they have to waive in writing, the conflicts of interest.

If you need help with deciding whether you need to hire a business attorney, you should contact a licensed business lawyer for an initial consultation.  As the old saying goes, an ounce of prevention is worth a pound of cure.

Start with the basics. Everything from floors to windows must be spotless (including your appliances).  Have the apartment professionally cleaned.  Offensive odors are a BIG turn-off – eliminate bad odor sources.

Eliminate the clutter.   Hide small kitchen appliances and other items that are sitting on countertops and tables; remove photographs from table-tops and organize the closets.  Pack up the bulk of large, personal collections.

Make it more spacious.  Remove excess furniture to make rooms more spacious.  Consider storing boxes and unnecessary furniture in a temporary off-site mini-storage space.

Expose Desirable Features.  Remove rugs if they expose nice hardwood floors; remove heavy drapes that keep out natural light.

Repair and repaint.  Apply a fresh coat of neutral colored paint; replace broken lighting, bath and kitchen fixtures; use bright bulbs; fix all squeaks and leaks; patch walls; and make sure all doors operate smoothly.

Create an Atmosphere.   On days of showings: turn on all the lights, and fill the home with a pleasing smell by placing fresh-cut fragrant flowers on a table or by simmering a small pot of water with vanilla extract.

You should consider hiring a New York real estate lawyer early in the process.  He or she will guide you through the home (condo or coop) selling process by preparing and negotiating the real estate broker agreement, drafting the contract of sale, answering your legal and tax questions, and arranging for the documents necessary to complete the sale, among other things.

When you buy a condo, you buy an individual parcel of real property, like a house or townhouse.  The condo building is divided into individual condos and a common area.  A condo owner owns its apartment and an undivided interest in the common area and is responsible to pay its own real estate taxes and its share of the common charges for the expenses to maintain and operate the common areas.  Unlike a coop building, there is no underlying mortgage on a condo building.

Generally, a condo has a higher value than a comparably sized coop; however, a condo buyer has additional closing costs for title insurance and mortgage recording taxes.  Depending on the coop building, the tax deductibility percentage of the monthly maintenance charges may differ.

You should consider consulting with a New York condo attorney or coop lawyer once you find an apartment you want to buy.  He or she will guide you through the home buying process by preparing or reviewing the contract of sale, advising you about financing and title insurance, answering your legal and tax questions, and arranging for the documents necessary to complete the purchase.

At the time of the closing, you will have to pay the price for the home and closing costs. Thereafter, you will need to budget for insurance premiums, maintenance, monthly loan payments, property taxes, utility bills, and repairs. Prior to entering into a contract of sale, it is recommended in some cases that a buyer conducts an inspection of the home, which includes, checking the age and condition of appliances, plumbing, roof, structures and wiring, and other physical elements of the home.

A New York real estate lawyer guides you through the home buying process by preparing or reviewing the contract of sale, advising you about financing and title insurance, answering your legal and tax questions, and arranging for the documents necessary to complete the purchase.

You should not sign a contract of sale unless it protects your rights.  Your New York condo lawyer reviews and amends the contract of sale accordingly. Any conditions that must be met before you complete a home purchase should be stated in your contract of sale.  For example, many buyers make their home purchase contingent upon obtaining financing.

The “closing” of a contract of sale completes the purchase and takes place at a meeting in the offices of the New York coop attorney representing the seller or lender, if any, or at a location designated by the coop corporation. At the closing, the buyer, seller, and lender sign a deed and mortgage (for a condo or townhouse) or the stock and proprietary lease documents and the security agreement (for a coop), pay the purchase price and exchange documents. At the closing, the buyer may receive a title insurance policy, along with a statement of closing charges and the keys to the home. Your NY real estate lawyer attends the closing to assure that the documents and computation of closing costs are accurate.

You should have your New York real estate attorney review the brokerage agreement prior to your signing to make sure it protects your interests.

Generally, it is not a good idea for the owner to be present when a prospective buyer is viewing the apartment. Buyers do not ask the candid questions they need answered in the presence of the owner nor do they examine the property as thoroughly as they’d like to, for fear of disturbing the owner. Find a broker that has the sales experience to sense which qualities of the property to highlight and which to minimize. Also, a broker will be able to sell your home without emotional involvement. A broker qualifies prospective buyers (including conducting credit checks), so that you will have a purchaser who will qualify for a mortgage and pass the board, if applicable. Lastly, if you do receive multiple offers, the broker can help you evaluate which offer is the best (sometimes, it is not the highest offer but the most qualified buyer to whom you will sell).

If the prospective buyer needs financing, the real estate broker can recommend a mortgage banker, broker or a choice of banks that offer co-op or condo loans on your building. They can also recommend New York real estate attorneys and coordinate access to the property by appraisers and engineers. They also facilitate expediting the board approval process and help find the answers to questions or concerns raised by the seller and buyer.

Workers’ Compensation.  The New York State Workers’ Compensation Law (“NYWCL”) requires qualifying businesses must obtain workers’ compensation insurance before putting employees to work.   This insurance covers your company for employees’ personal injuries incurred in the course of employment and deaths resulting from such injuries.

Disability Benefits.  The New York Disability Benefits Law (NY DBL) is a special section of the NYWCL that protects workers from non-occupational injury or sickness. If your company employs one or more employees (in covered employment) for 30 days in any calendar year, then you are subject to this law and must get protection, generally in the form of insurance, from a company authorized to write accident and health insurance in New York State, or from the New York State Insurance Fund.

Unemployment Insurance.   When you start your business in New York and hire employees, you must register the New York State Department of Labor Unemployment Insurance Division to determine whether or not you are liable for unemployment insurance in New York State, and if so you can register as an employer online.

Posting Notices.   Your New York business must post and maintain, in a conspicuous place, a printed notices stating that the company has: (i) complied with all the rules and regulations governing workers’ compensation, and (ii) secured the payment of compensation to your employees and their dependents as provided under the NYWCL. You can get these printed notices from your insurance carrier.  Alternatively, New York State and Federal posting requirements can be found at the New York State Department of Labor and the U.S. Department of Labor.  In addition, there may be special permits and/or licenses that need to be posted depending on the nature of your company’s business.

Federal Unemployment Tax.  Your company is subject to federal unemployment tax if, during the current or prior year, you paid wages of $1,500 or more during any calendar quarter in the current calendar year or any calendar quarter in the preceding calendar year; or employed at least one person for some part of one day for any 20 weeks during the current or preceding calendar year.  Your company will have to file with the Internal Revenue Service Form 940 and should read the instructions for “Form 940 Employer’s Annual Federal Unemployment (FUTA) Tax Return.”

Social Security.  As an employer, your New York business must file an application for an employer’s identification number on IRS Form SS-4. Your New York business can apply and obtain an Employer Identification Number (EIN) online (sometimes it is easier to use the toll-free number).

Immigration.  The Immigration Reform and Control Act of 1986 states that all employers are required to verify employment eligibility of new employees. The law obligates all employers, including New York businesses, to process Employment Eligibility Verification Form I-9.

Internal Revenue Service’s “Small Business and Self-Employed Tax Center” is an excellent site that provides links to information on employment taxes, wage reporting requirements, employer identification number (EIN) and other items of interest to New York businesses with employees.

Of course, it is best to discuss the above Employer Obligations for Employees in New York with a New York Business Attorney (or corporate attorney).

Here is my due diligence checklist of the most common items to investigate when conducting due diligence in the buying or merging of a small business (of course, these are among other things to review depending on the facts and circumstances of the specific transaction):

Legal Due Diligence

1.  Corporate Documents (or LLC Documents)

If the target business is a corporation, you (or your corporate attorney) should review the certificate of incorporation, good standing certificate, by-laws, minutes of shareholder and director meetings, shareholder agreements, and any outstanding warrants and option agreements.

If the target business is a limited liability company (LLC), you (or your corporate attorney) should review the articles of organization, good standing certificate, operating agreement, minutes of membership meetings, manager agreement, and any outstanding purchase rights agreements and option agreements.

In New York, you can order a good standing certificate from the New York Department of State, Division of Corporations.

2.  Agreements

Major Contracts:  You (or your business lawyer) should review all major distributor, supplier and customer agreements, all confidentiality and non-compete agreements, all intellectual property agreements (licenses into and out of the company), and all equipment leases.

Real Estate:  You need to review all real estate leases entered into by the target company (whether as a tenant or a landlord), purchase agreements, surveys (if a long term lease or fee owned), title insurance policies (if fee owned); you should ascertain whether any consents are needed for the contemplated business sale (or merger) transaction, how much the rent liabilities are, whether there are sufficient term(s) remaining on the lease(s), among other things.

Insurance Policies:  Have your risk advisor or insurance agent review all insurance policies carried by the target business to determine if the present coverage is adequate for the business as it is conducted (or plans to be conducted).

3.  Licenses and Permits.  Is the target business required to maintain licenses and permits with the local and state authorities (such as a liquor license or other operating permit)?  If so, you (or your corporate attorney) need to obtain all copies and determine which licenses may require the seller’s obtaining prior consent for the contemplated sale or merger of the business.  To find out what licenses and permits may be required in New York, you can visit the New York State’s Online Permit Assistance and Licensing website.

4.  List of all (major) Assets and Liabilities.  Regardless of whether you are buying the business as an asset purchase or a stock purchase, you want to be sure of what the target company owns and owes.  The target company’s assets may include cash, securities, equipment, inventory, intellectual property (copyrights, trademarks, patents, domain names, and other proprietary rights), notes and accounts receivables, real property (leased and owned).  Liabilities may include bank debt, employee benefits and bonuses earned and not yet paid, threatened, pending and current lawsuits, licensing violations, etc.  You should be provided with a list of all employees and their current salaries.  You should identify which employees are key to a successful transition and continued operation of the business.

5.  UCC Liens.  Uniform Commercial Code (UCC) information is important to any business or financial institution contemplating entering into a lien transaction as the secured party (the party providing funds or financing collateral). Knowing the current financial status of the target debtor business before extending credit is crucial, and it is the number of active, existing liens already in effect for that particular debtor party that most interests any future lender or secured party.  You can search the New York Uniform Commercial Code Bureau files and records to see what financial obligations (including IRS liens) have been incurred by the target business and to see what, if any, liens exist on the selling business’ assets.

6.  Customer Problems.  You can easily search the internet to see if there is any negative publicity or customer complaints about the target business.  The internet is a very powerful tool for viral marketing and unfortunately, for flaming a business.  You don’t want to buy a business that is saddled with a lot of negative consumer awareness.

Financial Due Diligence

You should have your accountant or financial advisor review the following diligence materials.  She or he should check whether there are any questionable accounting practices.

1.  Tax Returns.  Up to 5 years’ prior federal, state and local tax returns, including any sale and use tax returns.  In New York and in other states, the successor to a business may be liable for tax liabilities incurred in the years prior to its purchase of the business.  In order to be certain that you have the same returns that were filed with the taxing authorities, you can have the seller provide the applicable written consent so you can request copies of the actual tax returns directly from the applicable taxing authority.

2.  Financial Statements.  The seller of the business should provide detailed financial statements (including balance sheets and profit and loss statements) for the prior 3 to 5 years.  If the target business is large enough, your financial advisor or accountant might request to review “audited” financial statements that have been prepared and certified by a certified public accountant.

3.  Tax Liens.  Your accountant or financial advisor should review the any tax liens filed on any assets owned by the target business.

If you need help with conducting due diligence on a business, you should contact a licensed business attorney.

Of course, if you have any questions on How to Form a Limited Liability Company in New York, it is best to discuss them with a New York Small Business Lawyer.