Otis, Bedingfield & Peters, LLC is proud to announce the promotion of attorney Brandy E. Natalzia to Senior Associate with the firm

Otis, Bedingfield & Peters, LLC is proud to announce the promotion of attorney Brandy E. Natalzia to Senior Associate with the firm. “This promotion recognizes the outstanding contributions Brandy has made to the firm, her exemplary work, and her commitment to both the firm and her community,” says Senior Partner Fred L. Otis, Esq.

Brandy is a member of our business and transactions team. She graduated, cum laude, from Florida Coastal School of Law where she received Class Book Awards for her work on Trusts & Estates and Transactional Drafting. She received her Bachelor of Arts degree in communications, cum laude, from the University of North Florida in Jacksonville. Brandy is admitted to practice in Colorado and Florida.

She is a former judicial intern for the Honorable Jay Cohen of the Fifth Circuit Court of Appeals and the Honorable Marcia Morales Howard of the U.S. District Court for the Middle District of Florida. While in law school, Brandy served as the Managing Editor of the Florida Coastal Law Review and was the Chief Managing Editor of the Public Interest Research Bureau, a student organization committed to providing free legal research to underserved clients.

Brandy’s practice with the firm focuses on all areas of real estate and business transactions, including entity formation and contract drafting, review and negotiations.

Otis, Bedingfield & Peters, LLC attorney Lia Szasz is admitted to practice law in Colorado and Wyoming

Otis, Bedingfield & Peters, LLC is proud to announce that attorney Lia Szasz has been admitted to practice law in Colorado and Wyoming.

Lia worked as a law clerk for the firm throughout law school. She recently passed the bar and joined the firm as an associate attorney.

Lia obtained her undergraduate degree from Washington State University and her J.D. from the University of Colorado School of Law. While in law school, Lia received the best overall combined brief and oral argument award in the Colorado Appellate Advocacy Competition, and represented CU in the American Bar Association’s Client Counseling Competition. Before law school, Lia worked for a real estate and estate planning law firm, and for a title company.

Her practice at OBP focuses on business law, agricultural law, real estate law, and complex commercial litigation.

With a background in agriculture and real estate, she is particularly adept at assisting clients with matters related to farming and ranching operations.

Lia is committed to serving northern Colorado both professionally and as a member of its community.

 

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Otis, Bedingfield & Peters, LLC provides a range of legal services throughout Northern Colorado. OBP has 15 attorneys spread across its two offices in Greeley and Loveland. For more information, contact Lia Szasz at lszasz@nocoattorneys.com or Jennifer Lynn Peters at jpeters@nocoattorneys.com or call 970-330-6700 or visit www.nocoattorneys.com.

Turning Over the Keys to Your Business – By: Jeffrey T. Bedingfield

We’ve all heard the saying that there are only two things in life that are certain – death and taxes. The same might be said for your business that you’ve spent a good part of your life building. The difference is that the death of a business can be delayed or avoided all together and that depends upon how well you plan the passing of the business to a partner or the next generation.

Only about 30% of family businesses survive into the second generation and only about 12% into the third generation. For the most part, failures can be traced to one factor, little or no succession planning.

Succession planning, or, should I say, successful succession planning really boils down to creating continuity in management, culture and leadership in the midst of a change in ownership. It isn’t accomplished at an annual retreat or a planning session with an attorney, accountant or financial planner. It is developed and executed over a period of years.

Planning for a transition in the ownership of a family business has its own unique set of difficulties because you add family dynamics to the business dynamics. There are several key components to developing a successful plan that deals with family dynamics separately from the business dynamics. The key components to the development of a successful plan that deal with family dynamics are communication and trust. The key components to the development of a successful plan addressing business dynamics include culture, management and leadership.

The culture of a business is what defines that business internally and externally. It is the value system of the company and it establishes the reputation of the company within itself and the community. It defines the vision and goals of the company. Culture is what attracts and retains employees and customers. We all know that a big part of the reason why people do business with you is because they like you. Whether or not they like you more often than not depends upon culture.

Management of a company is not so much about who owns the company, but who will do the work of the business that makes it successful. The four areas of focus for management include administration and finance, operations and customer fulfillment, sales and marketing. More often than not in a family business, several of those areas are handled by you or another family member. While you may have developed the ability to handle each of those areas as you grew your business, turning over the reins of management of the company you’ve built requires that any person taking over one of those areas has the ability to hit the ground running. Before any business can be transitioned to the next generation, you must train those who will take over your responsibilities. You may be able to fill some areas with family members, but you might have to fill gaps in other positions with outsiders. More than likely, you are the individual who provides the leadership for the company and are the individual to whom everybody looks for direction. Before you can transition out of the business, you will need to find the individual or team who will take on that leadership role and give them the opportunity to position themselves in the eyes of all employees as the source of leadership and direction moving forward.

Assessing the abilities and competencies of employees and family members is a critical, but often awkward, part of succession planning. Not only must you find the right people, you must give them enough time to grow into their positions. Simply reaching a certain point in life and turning to a child and telling them that “it’s now your turn to make it or break it,” is a sure recipe for failure.

Finally, once the culture is clearly established, strong management is trained and in place, and leadership is established, you will have reached the point of being able to successfully “pass the baton” of ownership to the next generation. This is the point at which you complete the plan and set in motion your release of ultimate control to the next generation, whether in stages or all at once. Obviously, some control will be relinquished through developing and empowering management and allowing others to develop in leadership roles, but a change in ownership is really the transitioning of the ultimate control and responsibility for the business. A succession plan is as unique as each business and the owners of that business. There are many different tools available to the professional helping you develop your succession plan. They involve not only the structures for change in ownership, but also for providing incentives to retain key management and leadership and policies to create loyal employees.

The additional and unique nature of family dynamics in a business succession plan are more often than not accomplished through clear communication of the plan and the building of trust that the plan will be followed. Before the next generation can buy into any succession plan, they must first understand what that plan is. In addition, trust that the plan will be followed and executed can only be accomplished by the business owner fulfilling the promises and goals established by such a plan. Successful business succession planning is really most about preparation, common sense, communication and execution. It takes commitment to develop a plan and even greater commitment to follow it.

Should I Look for Environmental Issues Prior to Completing My Real Estate Transaction?

By: John Kolanz

A version of this article was published in the November 2016 BizWest Thought Leaders column.

When purchasing (often even leasing) commercial or industrial property, the answer is usually yes. Environmental issues take various forms, such as soil and groundwater contamination, mold or asbestos on structures, or the presence of wetlands or endangered species. They can even emanate from neighboring properties.

The context of the property and its intended use inform the nature of the environmental review. Often used is a Phase I Assessment, where a qualified consultant conducts a non-invasive evaluation of the property designed primarily to help protect against liability arising from contamination. It can also identify environmental issues that might render the property unsuitable for intended uses. For some properties however, a lesser screen may suffice.

Environmental issues need not be a deal killer — just identified and accounted for before closing. A knowledgeable environmental attorney can help a client define the proper scope of the investigation, and work with the consultant to meet the unique needs of the transaction at hand.

Is your property titled correctly? – By: Timothy P. Brynteson – Published in the BizWest Thought Leader column in October 2016.

Most couples assume that if one them dies, their home or other real estate will pass automatically to their spouse.  Normally couples own their home or other real estate “jointly” – in other words they own it together, or both of their names are on the title.  While this is almost always true, you may not own it as “joint tenants” which is how most couples think they own their home.  If your title does not specifically name you and your partner as “joint tenants” – you will be deemed to own your property as “tenants in common” which will mean that the survivor of the couple will need to file a probate proceeding to transfer the deceased partner’s property to themselves.  It is a good practice to check your title to property, cars and bank accounts to make sure they are titled properly and avoid extra work and expense when the first of the couple dies.

We extend congratulations to Diane Goddard on her 20th work anniversary! She’s still smiling after 20 years!

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High Court’s Wetlands Opinion Could be Game Changer

By: John Kolanz

A version of this article was published in BizWest in June 2016.

Chalk one up for property rights. The U.S. Supreme Court just changed the playing field for wetland permitting, notably tipping the balance toward landowners and developers seeking clarification of whether their planned activities require Army Corps of Engineers authorization. Moreover, in somewhat of a rarity in environmental cases, the court did so unanimously.

The Clean Water Act requires a landowner to obtain a Corps permit before working in “waters of the United States,” a phrase that defines the reach of the Act. Contrary to what one might expect, it often is not clear whether a property contains such waters. Therefore, the Corps has long provided property owners Approved Jurisdictional Determinations that state the agency’s definitive position on whether a project area contains protected waters.

If the Corps determines that a planned project area does not contain protected waters (a negative JD), the project can proceed without a permit. A negative JD generally gives the property owner a five-year “safe harbor” for work in the evaluated area. However, if the Corps determines that the area contains protected waters (a positive JD), the landowner typically seeks Corps authorization before proceeding.

In this case, a company in Minnesota sought to expand its existing peat-mining operation to nearby lands. Before doing so, it requested an Approved JD from the Corps for certain wetlands in the expansion area. The Corps issued a positive JD based on the wetlands’ “significant nexus” to a river some 120 miles away. Moreover, the Corps indicated to the company that the required permitting process would take years and be very expensive.

Corps regulations specifically allow a party to appeal an Approved JD to a higher level within the Corps. The company pursued such an appeal, but the Corps affirmed its original determination. The company then sought review of the Approved JD by a court.

For years, courts have supported the Corps’ position that Approved JDs are not judicially reviewable. This recently began to change, causing inconsistencies among the lower courts. The Supreme Court accepted this case to definitively resolve the issue.

The authority of a court to hear such an appeal turns in part on whether the agency action at issue — here, the Approved JD — has legal consequences. The Corps has long argued that Approved JDs effectively have no legal consequences because landowners still have the options of applying for a permit and appealing any unsatisfactory results, or proceeding without a permit on the theory that the Corps’ Approved JD is faulty.

All eight Supreme Court justices (the late Antonin Scalia would have made it nine) rejected the Corps’ position, finding the agency’s articulated options inadequate. The court observed that getting a permit can be time-consuming and expensive, citing a study from 1999 showing that permits, such as the one required here, take an average of 788 days and $271,596 to obtain. (These figures have likely risen significantly since then.) Moreover, a positive JD deprives landowners of the five-year safe harbor, exposing them to potential civil penalties of up to $37,500 per day, and even higher criminal fines and imprisonment. The court found these to be tangible legal consequences that make Approved JDs appropriate for judicial review.

The Corps’ response to this decision is difficult to predict. Since the Clean Water Act does not require the Corps to issue Approved JDs, the agency could simply stop the practice. However, one justice warned the Corps about such a move. 

In a concurring opinion, Justice Anthony Kennedy stated that the Clean Water Act, especially without the JD procedure, raises “troubling questions regarding the government’s power to cast doubt on the full use and enjoyment of private property throughout the nation.” In other words, dropping the practice of providing Approved JDs may prompt heightened scrutiny of the Corps’ authority under the Act. The court will likely soon have an opportunity to scrutinize the Corps’ Clean Water Act authority when, as most expect, it reviews a controversial rule defining which “waters” the Act protects.

Assuming the Corps continues its practice of issuing Approved JDs, this decision will change the dynamics between the Corps and landowners. Landowners will gain leverage in the JD process. The prospect of a resource-consuming judicial appeal will make the Corps less likely to push the envelope on JDs and more likely to seek common ground. Landowners should carefully consider the legal implications of this case, and how it ties into other recent Clean Water Act developments, before discussing planned projects with the Corps.

John Kolanz is a partner with Otis, Bedingfield and Peters LLC in Loveland. He focuses on environmental matters and can be reached at 970-663-7300 or JKolanz@nocoattorneys.com.

The First Decision in Forming a Business: What Type of Entity? – By: Corey Moore

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Choosing the appropriate entity for a new business is not as easy as one might think. Most people tend to gravitate towards a limited liability company, or LLC, for its relative ease of formation and asset protection, however there are various other entities that can be beneficial for an emerging business.  The various entity types, including C and S corporations, LLCs, and partnerships all have aspects that can be useful to a new business and should be examined before selecting an entity.

Businesses with Multiple Owners

If the new business entity will have multiple owners with different rights and interests when it comes to control, income, business losses, or assets upon liquidation, ownership rights may need to be structured differently for each owner.

If the new entity is a C or S corporation, ownership is limited to company issued stock and those owning the majority of outstanding stock control the business, whereas partnerships and LLCs are flexible and can customize and define control and interests through the entity’s operating agreement. The ability to customize LLCs and partnerships can allow the owners to set up a business structure that can take into account the differences each owner may bring to the business.

Earnings Bailout Potential

Further, it is important for the new business owners to fully understand the earnings bailout potential of various entities. With S corporations, LLCs, and partnerships, it is fairly easy to remove earnings from the business and pass them on to the owners.  In this case the profits generated by the business are taxed directly to the owners, so the distribution of profits in the form of dividends or partnership distributions will not carry tax consequences for the entity.  However, when a C corporation distributes earning to owners, or shareholders, in the form of dividends, the dividend distribution is not deductible to the corporation. Instead, it is double taxed, once to the entity and once to the owner, which can be a huge hit against company profits.  This tax trap can be avoided if the shareholders are employed by the corporation and receive earnings in the form of taxable compensation.  The compensation would then be deductible to the corporation, which results in a tax at shareholder level only.

Business Losses

A new entity can also benefit from utilizing losses generated by the business. The threshold issue is whether the losses should be retained by the entity or passed through to the owners. Losses generated by C corporations are retained in the business and can be carried backwards or forwards to be deducted against earned income.  This can be a valuable tool in lowering the business’s tax liability once the business makes a profit, but the shareholders never benefit from the losses of the business.  In an S corporation, LLC, and partnership, losses can be passed through to the owners.  For example, when losses are anticipated in the first year of the business, passing the losses on to the owners may generate tax advantages if the owners have other taxable income against which those losses can be offset. 

Ability to Restructure

Additionally, the ability of an existing organization to restructure without being penalized can be a helpful tool for a business down the road. For a C corporation looking to restructure, the options are limited.  If it converts to a partnership or LLC, the corporation will recognize gain on all its assets, and the shareholders will recognize gain on the liquidation of their stock, leading to tax liability.  An S corporation and other pass through entities, on the other hand, can convert without triggering the type of gain and tax consequences you would see with a C corporation.

Estate Plan Integration

Although most people do not consider it when starting a business, it is also important to integrate a new business entity with the owners’ estate plan. Owners may want to shift income to a lower tax bracket, freeze or slow down the growth of an estate, or utilize the annual gift tax exclusion.  To make use of these options, LLCs and partnerships provide the best options and flexibility.

Potential of Sale

Finally, although most people will not think about it when beginning a business, it is important to consider the possibility of selling the business or going public. If the business is an S corporation, partnership, or LLC when the assets are sold, the gains realized on the sale of the assets are taxed to the owners in proportion to their interests in the business.  In a C corporation there will be taxes levied on the proceeds at the corporate level and then upon distribution to the shareholders.  The shareholders will pay capital gains tax on the difference between the amount they received in distribution and their individual basis in the corporation’s stock.  While there are ways for C corporations to mitigate their tax liability, it would be easier to sell a business if it was not a C corporation.  However, if the company is funded with outside capital, as many emerging companies are these days, and the plan is to eventually go public, then a C corporation is the only option.  The interests of outside investors and potential gain that can be found on the public market may trump any of the other concerns discussed above.

Deciding which type of entity to use for a new business venture may not be a difficult decision for some, but it is important to look at all the factors before creating the entity. The above discussion does not address every factor to consider nor is it a thorough discussion of the factors mentioned.  The point is to make sure to fully analyze and understand how the choice of entity decision can help or hinder the goals of the business.