The Cummings & Cummings Law Journal

Regulatory Framework That Governs the “Blank Check Company” Label Blank check company is not merely a colloquial label; it is a term of art under federal securities law with concrete regulatory consequences. The principal anchor is Securities Act Rule 419, which defines and regulates offerings by companies that have no specific business plan or purpose

Understanding the “80/20 Company” Rules: What They Are and Why They Matter The term “80/20 company” describes a set of tax classification rules that exist in both federal and state contexts, each with materially different implications. At a high level, certain regimes use an 80 percent threshold to separate U.S.-centric businesses from groups that predominantly

Understanding What Counts as a Golden Parachute Payment In merger and acquisition transactions, a “golden parachute payment” refers to compensation that is contingent on a change in control and paid to a disqualified individual. While this sounds straightforward, the legal definition under Section 280G is broader and more intricate than most executives and companies realize.

Understanding the “Kiss Kiss Bank Bank” Peer-to-Peer Lending Model Peer-to-peer lending that resembles the “Kiss Kiss Bank Bank” model connects individual lenders directly with individual borrowers through a marketplace or informally through social or professional networks. The legal and tax consequences of such arrangements are often underestimated. Borrowers and lenders may assume that a simple

Understanding Unearned Revenue: What It Is and Why It Matters for Taxes Unearned revenue, also called deferred revenue, is cash collected before goods or services are delivered. It arises in common arrangements such as annual software subscriptions, prepaid service contracts, gift cards, maintenance agreements, retainers, and event deposits. On the balance sheet, it is recorded

Equity Without a Thoughtful Vesting Schedule Exposes the Company to Founder Disputes Absent a carefully drafted vesting schedule, a departing founder can retain a disproportionately large equity stake relative to actual contribution. This is not a theoretical risk. Without reverse vesting and a company repurchase right, a co-founder who leaves after a few months may

Choosing the Right Entity and Founders’ Agreements One of the earliest and most consequential legal risks when starting an online business is selecting and documenting the appropriate business structure. While many founders assume that forming a limited liability company is a simple, one-step filing, the reality is that entity choice impacts taxation, governance, ownership transfers,

  Understanding the Double-LLC Structure The double-LLC structure is a legal strategy for business owners seeking privacy, liability protection, and operational flexibility. It involves the formation of two limited liability companies: a holding LLC and an operating LLC. The operating LLC conducts day-to-day business activities, while the holding LLC owns and manages it. On public

Understanding the Landscape of Business Insurance Payouts Business insurance proceeds are not monolithic. They can compensate for destroyed inventory, reimburse legal settlements, replace lost revenue, or fund a buy-sell agreement upon the death of an owner. Each category carries its own tax character. Although many owners assume that “insurance payout” equates to “tax-free,” that assumption

Business owners frequently ask how to exclude self-employment income without sacrificing liability protection or administrative simplicity. The answer often points toward forming a limited liability company and electing taxation as a corporation. While the concept sounds straightforward, the mechanics are intricate. The Internal Revenue Code treats different entity types in fundamentally different ways, and the

Understand What State Franchise Taxes Are and Why They Matter for Multistate LLCs As an attorney and CPA, I regularly advise clients that state franchise taxes are not an afterthought but a core compliance obligation for any multistate LLC. Despite the name, franchise taxes do not relate to franchise agreements in the popular sense. Rather,

Understanding the Regulatory Framework: RCRA’s Cradle-to-Grave System Corporate hazardous waste management is governed primarily by the Resource Conservation and Recovery Act (RCRA), which establishes a cradle-to-grave oversight structure. This framework applies from the moment a waste is generated to its ultimate treatment, storage, and disposal, and it imposes strict, enforceable duties on the generator. Although

Clarify the Deal Form: Asset Sale Versus Equity Sale The threshold choice in any tax-efficient business sale is whether the transaction will be structured as an asset sale or an equity sale (stock or membership interests). This choice drives capital gains versus ordinary income outcomes, dictates which party bears legacy liabilities, and determines the availability

Understand How the United States Defines a “Trust” Before You Structure a Foreign Pension As an attorney and CPA, I begin every foreign pension analysis by returning to first principles: the United States does not rely exclusively on foreign legal labels. A retirement arrangement that local law calls a “pension” or “superannuation” may be treated

The New Baseline: What Section 174 Requires Today For tax years beginning after 2021, Internal Revenue Code Section 174 requires businesses to capitalize and amortize specified research or experimental expenditures, rather than deduct them currently. This regime applies to amounts paid or incurred in connection with the development or improvement of a product, including software.

Understanding Flow-Down Clauses and Why They Matter Flow-down clauses are provisions in a prime government contract that the prime contractor must incorporate into its subcontracts. These clauses ensure that subcontractors are bound to the same statutory and regulatory obligations that the government imposes on the prime. The concept appears straightforward, yet the execution is rarely

Why Inadequate Clawback Provisions Create Outsized Legal Exposure An underdeveloped clawback provision for bonus compensation is often dismissed as a minor contractual detail. In practice, an inadequate provision can become the fault line for multi-year litigation, lost tax deductions, accounting restatements, and reputational harm. Employers frequently assume that “if it is in the plan, it

Understanding Appraisal Rights Through the Lens of Enterprise Value Enterprise value sits at the center of many appraisal rights disputes because it is meant to capture the value of the entire operating business on a debt-free, cash-free basis. In appraisal litigation, courts frequently seek to determine the fair value of a company as a going

Understanding a Flip‑In Poison Pill and Why Tax Consequences Are Not Intuitive A flip‑in poison pill, often adopted as a shareholder rights plan, allows existing shareholders (other than a triggering acquirer) to purchase additional shares at a steep discount if any party crosses a specified ownership threshold. The economic effect is immediate dilution of the

Understanding Synthetic Equity and When It Makes Sense Synthetic equity refers to incentive arrangements that mimic the economic upside of ownership without issuing actual shares or membership interests. Common structures include phantom stock units (or phantom units) and stock appreciation rights (SARs). These awards typically deliver cash, or sometimes settle in shares, based on the