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Alert: Alert [December 27, 2024]: Impact of Ongoing Litigation – Deadline Stay – Voluntary Submission Only FinCEN has issued the following alert regarding current status of BOI reporting: In light of a recent federal court order, reporting companies are not currently required to file beneficial ownership information with FinCEN and are not subject to liability if they fail to do so while the order remains in force. However, reporting companies may continue to voluntarily submit beneficial ownership information reports. The Corporate Transparency Act (CTA) plays a vital role in protecting the U.S. and international financial systems, as well as people across the country, from illicit finance threats like terrorist financing, drug trafficking, and money laundering. The CTA levels the playing field for tens of millions of law-abiding small businesses across the United States and makes it harder for bad actors to exploit loopholes in order to gain an unfair advantage. On Tuesday, December 3, 2024, in the case of Texas Top Cop Shop, Inc., et al. v. Garland, et al. , No. 4:24-cv-00478 (E.D. Tex.), the U.S. District Court for the Eastern District of Texas, Sherman Division, issued an order granting a nationwide preliminary injunction. Texas Top Cop Shop is only one of several cases that have challenged the Corporate Transparency Act (CTA) pending before courts around the country. Several district courts have denied requests to enjoin the CTA, ruling in favor of the Department of the Treasury. The government continues to believe—consistent with the conclusions of the U.S. District Courts for the Eastern District of Virginia and the District of Oregon—that the CTA is constitutional. For that reason, the Department of Justice, on behalf of the Department of the Treasury, filed a Notice of Appeal on December 5, 2024 and separately sought of stay of the injunction pending that appeal. https://www.fincen.gov/boi

In a case of first impression, the Pennsylvania Commonwealth Court recently held that a consumer is not obligated to give a contractor written notice – or notice by any particular medium or means – when cancelling a home improvement contract within the three (3) day recission period. Case Background The ruling in Commonwealth, Office of Attorney General v. Gillece Services, LP , No. 861 C.D. 2023 (July 3, 2024) stemmed from a three-judge panel court that reviews civil actions the Commonwealth initiates through state government officers acting in their official capacity, that others bring against the Commonwealth, and appeals from state agency decisions. It affirmed Gillece’s appeal of the lower court’s decision. The Pennsylvania Attorney General’s Office initiated the original case under the state’s Unfair Trade Practices and Consumer Protection Law (UTPCPL), a law designed to restrict deceptive business procedures. The Attorney General alleged that the contractors sued would only cancel home improvement contracts unless the consumer hand-delivered a written request to the contractor’s employee or corporate offices. The Attorney General additionally alleged that the contractors further penalized customers by: entering their properties without permission and commencing work. failing to disclose that contractors would not honor verbal cancellation requests. failing to refund all payments within ten (10) business days of receiving the consumer’s cancellation request. misrepresenting to the consumer that, because they had not signed an emergency work authorization, their deposit was nonrefundable. The complaint asserted that these actions violated either the UTPCPL or the Pennsylvania Home Improvement Consumer Protection Act (HICPA). UTPCPL, 73 P.S § 201-1, et seq. , bars unjust, fraudulent and otherwise deceptive business practices in sales and service contracts. HICPA, 73 P.S. § 517.7, et seq. , protects homeowners from fraudulent and deceptive home improvement contractor practices. HICPA works like an extension of the UTPCPL. Violations under HICPA are considered violations of the UTPCPL . Case Analysis The court addressed whether HICPA requires home improvement contractors to honor a customer’s non-written cancellation request. More specifically, the court questioned whether the UTPCPL’s written notice requirements applied to HICPA. In doing so, the court scrutinized two specific UTPCPL and HICPA provisions: UTPCPL, 73 P.S. § 201-7, which states that when a contractor sells or enters into an agreement for services or goods that cost twenty-five dollars ($25) or more, the consumer may cancel the contract or sale by notifying the seller, in writing, within three (3) full business days following the day on which they entered into the contract. HICPA 73 P.S. § 517-7(b), which permits an individual who signed a home improvement contract, to cancel the contract without penalty, no matter where they signed the contract, within three (3) business days. The court stressed that HICPA left out specific written notice requirements (unlike the UTPCPL which contains such directives). Strictly observing this omission, the court found that written notice is not required to cancel a home improvement contract. It did so despite HICPA’s specific reference to UTPCL provisions. Ultimately, for home improvement contractors, the decision indicates that they may no longer require written notices to rescind contracts and they can no longer rely upon the UTPCPL’s statutory language to ensure that their contracts are HICPA compliant. The Fleischmann Law Firm will monitor this matter and keep you updated on any changes or developments. The Fleischmann Law Firm, P.C. : The Fleischmann Law Firm specializes in business law and can guide your corporation through emerging contract laws and other rule and notice updates and changes. Its attorneys partner with you to minimize risk and liability, offer objective and fair assessments, and weigh all circumstances and options. They offer solid recommendations and provide superior representation. Attorney Craig J. Fleischmann and staff offer over thirty years of experience, integrity, cost-effectiveness, value, and integrity. Contact the Fleischmann Law Firm today.

Background The Fleischmann Law Firm continues to closely follow ongoing developments regarding the Federal Trade Commission’s (FTC) efforts to nationally ban employee non-compete agreements. We thus far published two blogs on this matter. The first detailed the FTC’s ban or Noncompete Rule . The second reviewed legal challenges questioning the FTC’s Constitutional authority and advised that in July 2024, a Texas federal court in Ryan LLC et al. v. Federal Trade Commission issued a temporary order prohibiting the FTC from enforcing the Noncompete Rule and plans to issue a final rule. Recent Texas Case Developments On August 20, 2024, Ryan ultimately concluded that the Noncompete Rule exceeded the FTC’s authority. Judge Ada Brown, who issued the decision, maintained that the FTC’s enabling statue (Federal Trade Commission Act) did not intend it to issue substantive rules to thwart unfair competition methods. Rather, it intended it to focus on unfair or deceptive acts or practices. Because the Noncompete Rule focused on unfair competition methods, the FTC lacked the authority to issue the Noncompete Rule. Judge Brown also maintained that because the Noncompete Rule was random, inconsistent, and unreasonably extensive, it violated the Administrative Procedure Act Judge Brown’s decision permanently blocks the Noncompete Rule. Nationwide noncompete bans will not take effect on September 4, 2024, and employers no longer need to issue notifications to workers bound to noncompete agreements. The FTC is presently considering appealing this decision to Fifth Circuit Court of Appeals, so this matter may not yet be over. Related Federal Case Developments In the Pennsylvania federal matter, ATS Tree Services v. FTC , the court denied ATS’ preliminary motion for an injunction against the Noncompete Rule. The court held that ATS could not establish irreparable harm or the probability of success on the evidence, meaning the court would find the Noncompete Rule enforceable. If ATS ultimately enforces the Noncompete Rule, it would conflict with Ryan . Potential ATS challenges would proceed to the Third Circuit Court of Appeals, where potential conflicts in those courts would lead to requests for U.S Supreme Court review. Should that occur, and should the Supreme Court decide to review the matter, it would likely address recent developments regarding the Administrative Procedures Act. Administrative Procedure Act During the 1930s, President Franklin Roosevelt created a series of agencies to implement his New Deal programs. In 1946, Congress enacted the Administrative Procedure Act (APA) to regulate administrative agencies’ decision-makings, avert abuse, make agency actions more publicly acceptable, and to offer an essential outline for federal agencies’ procedures. President Harry Truman signed the APA into law. Administrative agencies implement, enforce, and oversee rules and regulations. There are two core kinds of administrative agencies: 1) independent agencies and 2) executive agencies. The president exercises more control over executive agencies. The Departments of Commerce and Defense are executive agencies examples. The FTC is an independent agency. Recent Supreme Court Holdings Regarding The APA In 2024, the Supreme Court, in Loper Bright Enters. v. Raimondo , 144 S. Ct. 2244 (2024) overruled Chevron USA v. National Resources Defense Council (1984), which for several decades, many knew as the Chevron Doctrine (which stated that if federal legislation is ambiguous or creates an administrative gap, the courts must submit to the regulatory agency's reasonable explanation). Loper Bright overruled Chevron and held that, under the APA, courts must decide whether an agency acted within its statutory authority and may not accommodate an agency’s ambiguous legal interpretation. Loper Bright indicates that the Supreme Court might say that the FTC did not offer a sufficient legal basis for the Noncompete Rule. State Bans on Noncompete Agreements Some states have their own limits on employee Noncompete Agreements. Many enacted rules addressing noncompete agreements for specific workers and/or industries. This firm published a recent blog on Pennsylvania’s ban on healthcare noncompete agreements . The Texas federal court ruling does not affect the Pennsylvania healthcare ban or any other state ruling. The Fleischmann Law Firm will continue to keep you updated on these matters. The Fleischmann Law Firm, P.C. The Fleischmann Law Firm specializes in business law and can guide your corporation through these and other rule and notice updates and changes. Its attorneys partner with you to minimize risk and liability, offer objective and fair assessments, and weigh all circumstances and options. They offer solid recommendations and provide superior representation. Attorney Craig J. Fleischmann and staff offer over thirty years of experience, integrity, cost-effectiveness, value, and integrity. Contact the Fleischmann Law Firm today.

This firm recently published two blogs regarding the Federal Trade Commission’s (FTC) nationwide ban on non-compete agreements (Noncompete Rule). The first examined the Noncompete Rule . The second covered a federal court’s temporary order that prohibited the FTC from enforcing the Noncompete Rule . The court will soon issue a final order and other federal cases are pending. This firm will provide continued updates on this issue. Some state lawmakers, Pennsylvania included, anticipated that the federal courts will block the FTC’s ruling and moved forward with passing legislation to ban certain healthcare provider noncompete agreements. Background and Significant Details In August 2023, Pennsylvania State Representative Dan Frankel (D-Allegheny) introduced House Bill 1633 to ban select healthcare noncompete covenants. Twenty-three other house representatives supported the bill. After the house and senate (General Assembly) reviewed and updated the bill, in July 2024, Governor Josh Shapiro signed it into law as The Fair Contracting for Health Care Practitioners Act (Act 74) . The General Assembly determined that: Noncompete covenants caused Health Care Practitioners to fear termination and their ability to find employment in their line of work. Combined hospital systems are gradually stretching over extensive regions and noncompete covenants could potentially prohibit Health Care Practitioners from practicing outside their original employment setting. Noncompete covenants impede the competition that enhance patient services and improve employee dynamics, which ultimately discourage Health Care Practitioners from wanting to practice in Pennsylvania. The General Assembly also observed that geography, transportation, and practitioner availability frequently governed patient’s access to patient’s access to health care and that rural residents often travel several hours for basic medical care. Seamless care is a fundamental public policy and Pennsylvania cannot risk losing Health Care Practitioners to other states. Definitions and Conditions Under The Fair Contracting for Health Care Practitioners Act (Act 74) The Fair Contracting for Health Care Practitioners Act (Act) describes Health Care Practitioners as licensed: Medical Doctors Osteopathic Physicians Registered Nurse Practitioners Nurse Anesthetists Physician Assistants The Act applies only to these abovementioned Health Care Practitioners. The Act defines a noncompete covenant as an agreement between a Health Care Practitioner and employer that hinders the Health Care Practitioner’s capacity to: Continue treating patients. Independently accept new patients. Accept new patients with a competing employer. The Act considers any covenant or amended noncompete covenant a Health Care Practitioner and employer agree upon after the effective date of January 1, 2025 as contrary to public policy and, thus, void. The employer, therefore, cannot enforce any such agreement. The Act, however, allows an employer to enforce a non-compete covenant that lasts less than one year, as long as the employer did not terminate the Health Care Practitioner. Patient Notification Requirements Within ninety (90) days after a Health Care Practitioner willingly exits employment, the Act requires the employer to notify the patients that the Health Care Practitioner saw within the past year and the patients with whom the departing Health Care Practitioner had an ongoing outpatient relationship for two or more years. The notification must: Inform about the Health Care Practitioner's departure. Advise that the patient has a right to select a new Health Care Practitioner amongst the employer’s existing Health Care Practitioners. Instruct how the patient can transfer their health records should they wish to continue care with another practice or the departing Health Care Practitioner. The notice does not have to offer any specifics about the departing Health Care Practitioner’s future services. Recovery of Health Care Practitioner Expenses The Act allows employers to recover reasonable relocation, training, and patient-based establishment expenses from a freely departing Health Care Practitioner, provided: The employer can directly attribute said expenses to the freely departing Healthcare practitioner. Said expenses accrued within three years prior to the Health Care Practitioner’s departure. The Health Care Practitioner repays said expenses over a five-year period from the departure date. Act Exclusions The Act, thus far, does not appear to impact noncompete agreements: Approved prior to the effective date of January 1, 2025. Concerning the transfer or sale of a business entity in which a Health Care Practitioner holds ownership interest. However, there are some ambiguities in the language of the Act that may require court interpretation or further legislative clarification. This firm will provide continued updates on this issue. The Fleischmann Law Firm, PC The Fleischmann Law Firm specializes in business law and can guide your corporation through these and other rule and notice updates and changes. Its attorneys partner with you to minimize risk and liability, offer objective and fair assessments, and weigh all circumstances and options. They offer solid recommendations and provide superior representation. Attorney Craig J. Fleischmann and staff offer over thirty years of experience, integrity, cost-effectiveness, value, and integrity. Contact the Fleischmann Law Firm today.

Background In May 2024, just a few months ago, this this firm published a blog regarding the Federal Trade Commission’s nationwide ban on non-compete agreements (Noncompete Rule). The blog explained the history behind the Noncompete Rule, how and why the Federal Trade Commission (FTC) recently determined that non-compete agreements violated the Federal Trade Commission Act, defined non-compete agreements and related terms, and detailed steps employers must take to notify certain workers bound to non-compete agreements prior to the effective. At that time, the FTC’s Noncompete Rule effective date was September 4, 2024. Challenging Lawsuits The blog also noted that several plaintiffs challenged the FTC’s Noncompete Rule. One involved a Texas tax service firm that claimed the FTC did not have the constitutional authority to issue the rule. On July 3, 2024, the United States District Court Judge in Ryan LLC v. Federal Trade Commission issued a temporary order prohibiting the FTC from enforcing the Noncompete Rule. At present, the ruling pertains only to the parties. The court, however, expects to issue a final ruling by August 30, 2024. The court could expand the ban and completely prohibit the Noncompete Rule. The challenge brought in the United States District Court for Eastern District of Pennsylvania, ATS Tree Services, LLC v. The Federal Trade Commission , which seeks a nationwide injunction against the ban is still pending. The ATS Tree Services Court has indicated it will issue its decision by July 23 rd . Watch this space for further developments. The Fleischmann Law Firm, P.C. The Fleischmann Law Firm specializes in business law and can guide your corporation through these and other rule and notice updates and changes. The firm’s attorneys partner with you to minimize risk and liability, offer objective and fair assessments, and weigh all circumstances and options. They offer solid recommendations and provide superior representation. Attorney Craig J. Fleischmann and staff offer over three decades of experience, integrity, cost-effectiveness, value, and integrity. Contact the Fleischmann Law Firm today.

The Federal Trade Commission (FTC) recently determined that non-compete agreements violated the Federal Trade Commission Act and announced a nationwide ban on their use going forward and certain restrictions for previous ones . The commission believed non-compete agreements stripped energy from the American economy and hindered workers from seeking new jobs and starting new businesses. It thus believes the ban will increase salaries, reduce health care costs, and inspire more patents. The Noncompete Rule will become effective September 4, 2024. The FTC will codify it in the Code of Federal Regulations at 16 CFR Part 910. Employer Notice Requirements The Noncompete Rule requires employers to notify to all workers (other than senior executives) bound to non-competes that they will no longer enforce the agreement. Employers must forward the notice on or before September 4, 2024 (the effective date). To assist, the FTC posted a sample notice containing model language (use link to access) that employers can use. What is a Non-Compete Agreement? The Noncompete Rule describes non-compete agreements as any written, oral, or business policy that penalizes, forbids, or attempts to stop a worker from seeking or accepting another position or operating another company. Disputes regarding whether a non-compete agreement violates the rule will be handled on a fact-specific, case-by-case basis. Who is a Worker? The Noncompete Rule defines a worker as any current or previous worker, paid or unpaid. Such workers can include independent contractors, volunteers, and interns. Who is a Senior Executive? The Noncompete Rule defines a senior executive as a policy-making worker who also earns more than $151,164 a year. This annual salary includes commission and nondiscretionary (guaranteed) bonuses and compensation. Policy-making refers to the authority to make significant decisions regarding a business’ direction. This definition does not involve advising or influencing a business’ decisions or making policy decisions for a business subsidiary. Chief executive officers and presidents are policy-makers, but these positions may include others. What Does the Noncompete Rule Do? After the effective date (September 4, 2024), the Noncompete Rule: bans all new non-compete agreements with all workers, including senior executives. bans employers from enforcing existing non-compete agreements with workers (except in matters already in litigation). Existing senior executive non-compete agreements, however, can stay active. To What Does the Noncompete Rule Not Apply? The Noncompete Rule does not apply to bona fide business entity Sale Agreements or any legal actions involving non-compete agreements that arose prior to the effective date (September 4, 2024). The rule does not limit non-conflicting state laws that restrict non-compete agreements, but it will block state laws that conflict with it. If an individual has a good-faith basis to believe that the Noncompete Rule does not apply, this may serve as a defense in an enforcement proceeding. How Will the Rule Be Enforced? Though the FTC Act deems rule violations “unfair methods of competition,” it does not offer a party private action rights and does not allow itself to recover civil penalties or other monetary relief from others participating in unfair competition methods. The FTC may participate in its own internal review and consider issuing a cease-and-desist order to a violating employer. Or it may seek a federal court injunction that stops a business from engaging in prohibited activities. If a party fails or refuses to comply with an already issued rule violation cease and desist order, the FTC can seek to have that party held in contempt and obtain civil penalties. What Inspired the FTC’s Decision? In July 2021, President Joseph Biden issued an Executive Order encouraging competition. He claimed non-compete agreements improperly limited workers’ abilities and urged the FTC, which enacts laws to inhibit unfair business practices, to lessen their use. Alternatives to Non-Compete Agreements Non-disclosure agreements (NDAs) would effectively safeguard private and classified information. Many non-compete agreements already have NDAs. Another alternative are non-solicitation clauses. Note, however, that NDAs and non-solicitation clauses that prevent workers from accepting employment or operating a business could still be considered non-compete agreements under the rule. Suspected Rule Violations After the effective date (September 4, 2024) business owners, workers, and customers can email suspected rule violations to the Bureau of Competition at noncompete@ftc.gov . Federal Lawsuits So far, there are three federal lawsuits challenging the FTC’s decision. A Texas tax service firm believes that the FTC did not have the authority to issue the rule and that the its decision was unconstitutional. The Chamber of Commerce additionally filed suit in Texas. It, too, is questioning the bureau’s legal authority to issue the ban. The court, however, due to overlapping and “first in time” rule issues, stayed the Chamber of Commerce matter. A tree service also filed a suit in Pennsylvania. It considers non-compete agreements necessary to protect training methods. More plaintiffs may file additional lawsuits. Stay Informed Business owners should be aware of these changes, notice requirements, rule applications, and legal interpretations. They may also want to discuss other alternatives that would protect their business interests and consult with a professional advisor. Watch this space for future blogs about this and other corporate law updates and changes. The Fleischmann Law Firm, P.C. The Fleischmann Law Firm specializes in business law and can guide your corporation through these and other rule and notice updates and changes. The firm’s attorneys partner with you to minimize risk and liability, offer objective and fair assessments, and weigh all circumstances and options. They offer solid recommendations and provide superior representation. Attorney Craig J. Fleischmann and staff offer over three decades of experience, integrity, cost-effectiveness, value, and integrity. Contact the Fleischmann Law Firm today.

Information You Need to Know About the Beneficial Ownership Information Reporting Company Rules Effective January 1, 2024 Criminals often use anonymously owned United States companies to launder money, fund terrorism, evade taxes, and participate in other unlawful activities. To detect and counter these activities, Congress passed the Corporate Transparency Act (“CTA”). The act sets forth reporting rules for all domestic and foreign companies. Every qualifying “Reporting Company” must relay Beneficial Owner Information (“BOI”), along with other pertinent data, to the Financial Crimes Enforcement Network (“FinCEN”). Download FinCEN’s Small Entity Compliance Guide through this link . A Reporting Company’s failure to comply could lead to very extreme penalties. This article provides a general overview of these definitions and reporting rules. It also outlines the deadlines, penalties, and exemptions. What is a Reporting Company? A Domestic Reporting Company is any entity that is required to formally file a document with a U.S. state, territory, or Native American Tribe to establish its existence (e.g. corporation, limited liability company [“LLC”]). A Foreign Reporting Company is any non U.S. entity that has formally filed documents to do business with any U.S. state, territory, or Native American Tribe. U.S. territories include American Samoa, Guam, Northern Mariana Islands, Puerto Rico, and the U.S. Virgin Islands. Who Is a Beneficial Owner? A Beneficial Owner is anyone who directly or indirectly: exerts substantial control over the Reporting Company (a senior officer or anyone who appoints or removes senior officers or influences the governing corporate body or determines important matters, exerts substantial control) or owns a minimum of 25% of the Reporting Company (ownership includes equity, stock, voting rights, stock, capital or profit interests, options, and any other ownership means) If an individual satisfies either of these definitions, they are a Beneficial Owner. Individuals meeting a Beneficial Owner classification may be exempt if they are: serving as an intermediary, candidate, custodian, or on another person’s behalf a minor child acting exclusively as a Reporting Company’s employee simply a Reporting Company’s future heir just a Reporting Company’s creditor Information a Reporting Company must Detail A Reporting Company must provide detailed information to FinCEN about Beneficial Owners and the company. Reporting Companies created or registered after January 1, 2024 are required to detail information about Company Applicants. A Company Applicant is the individual who directly filed the creating or registering Reporting Company documentation, as well as the individual primarily responsible for controlling such filings. A Reporting Company can have several Company Applicants. Companies or legal entities cannot be company applicants. Information a Reporting Company Must Provide to FinCEN A Reporting Company must disclose its: complete legal name, any trade name, and any “doing business as” name current address formation or registration jurisdiction IRS Taxpayer Identification Number (TIN) Employer Identification Number (EIN) For Foreign Companies: Foreign Tax ID Numbers and Territory Name Beneficial Owners and Company Applicants (when applicable) must provide their: full legal name birth date complete current address (Company Applicant’s may use business addresses) Beneficial Owners and Company Applicants (when applicable) must also supply images, designation numbers, and the issuing venues of one of the following, unexpired, identification documents: state driver’s license passport state, local government, or Native American Tribal identification document foreign passport (if none of the aforesaid exist) FinCEN Reporting Method Every Reporting Company created or registered to do business before January 1, 2024 will have until January 1, 2025 to file their initial report. Every Reporting Company created or registered on or after January 1, 2024, will have 30 days to file their initial report (beginning from the state’s date of notice or public creation notice – whichever is earlier).*** ***FinCEN Update November 29, 2023*** FinCEN Extends Deadline for Companies Created or Registered in 2024 to File Beneficial Ownership Information Reports FinCEN is extending the deadline for certain reporting companies to file their initial BOI reports. Specifically, reporting companies created or registered in 2024 will have 90 calendar days from the date of receiving actual or public notice of their creation or registration becoming effective to file their initial reports. Reporting companies created January 1, 2025 or after will have 30 days to report. Should a report contain any errors, a Reporting Company has 30 days from the date it discovered the error or had reason to know of the error to file a corrected report. Should Beneficial Owners or company information change, a Reporting Company has 30 days from said change date to file an updated report. Where applicable, a Reporting Company is not required to file an updated report about Company Applicant changes. There is no BOI report filing fee. FinCEN can begin accepting electronic company reports through a secure system beginning January 1, 2024. FinCen is presently setting up the system and will be available at that time. Its website contains reference materials and other BOI resources . Potential Penalties for Not Complying with the Reporting Company Rules A Reporting Company’s failure to provide proper BOI to FinCEN could result in civil penalties of $500 for each day the violation goes on, as well as $10,000 in criminal penalties and/or two years of prison. What Businesses are Exempt? The CTA excluded certain company classes from reporting. Such classes include entities where BOI is currently a matter of public record; the government currently oversees the entity; and, where the Treasury Secretary (along with the Attorney General and Homeland Security Secretary’s concurrence) justified the exemptions. A few examples of exempted businesses include: brokers, dealers, and securities issuers banks, credit unions, and loan holding companies insurance companies public accounting firm public utilities certain tax-exempt corporations businesses that employ more than 20 full time workers certain inactive corporations Preparations You Can Make Now It is vitally important for all entity proprietors to know about the upcoming CTA’s Reporting Company requirements and whether they are Beneficial Owners and potential Company Applicants. To streamline the process and protect yourself and your business from penalties, consult with a professional advisor. Watch this space for future blogs about this and other corporate law updates and amendments. The Fleischmann Law Firm, P.C. The Fleischmann Law Firm specializes in business law and can guide your corporation through these and other time-sensitive reporting regulations. Its attorneys partner with you to minimize risk and liability, offer objective and fair assessment, and weigh all circumstances and options. They offer solid recommendations and provide superior representation. Attorney Craig J. Fleischmann and staff offer over three decades of experience, integrity, cost-effectiveness, value, and integrity. Contact the Fleischmann Law Firm today.

State Corporate Codes Each state has a set of laws that set forth the definitions, duties, and requirements of how business owners or shareholders must operate and manage the establishment, be it a corporation, limited liability company (“LLC”) or other commercial entity or association. The laws cover everything involving the business, including its name, registered agents, mergers, registrations, and much more. Often, these laws or regulations are “defaults” where no one properly drafted documents, such as bylaws, shareholder agreements, or LLC operating agreements. Some are mandatory provisions. The state in which the individuals who created a corporation and filed the proper documents, regardless of structure, is the governing or home state. That state might have been the corporation’s primary location, where it conducts business, or the state could have offered tax and liability advantages. Non-formation states are “foreign” states. Now and then, state legislatures amend state codes. Such allows policy updates without having to replace the laws. Recent Updates to Pennsylvania Title 15 On November 3, 2022, Governor Tom Wolf signed Act 122 of 2022 (the “Act.”) into law, which updated Title 15 of the Pennsylvania Consolidated Statutes -- Corporations and Unincorporated Associations. The Act revisions focused on the following areas: New State Department Filing Requirements : currently, Pennsylvania relies on a ten-year (decennial) filing requirement to determine whether a business entity is still active. This led to confusion about whether businesses still existed, potential fraud, and other misunderstandings. The Act restructures the filings to annual reporting (like most other states require) requirement, beginning in 2025. Entity type will determine filing deadlines. The annual filing fee is $7.00, which the state will waive for nonprofit corporations and not-for-profit Limited Partnerships or LLCs. Most importantly, a businesses’ failure to file the newly required annual report will subject it to administrative dissolution/termination/cancellation and loss of its protected name. Businesses will want to be sure that their registered address with the Department of State is current so that they receive proper notices. Entity types that the Act requires new annual reporting: o Domestic Business Corporations o Domestic Nonprofit Corporations o Domestic Limited Liability (General) Partnerships o Domestic Electing Partnerships that are Not Limited Partnerships o Domestic Limited Partnerships (Including Limited Liability Limited Partnerships) o Domestic Limited Liability Companies o Domestic Professional Associations o Domestic Business Trusts o All Registered Foreign Associations The new annual reports require the following information: o Business name o Formation jurisdiction o Registered office address o Name of at least one governor (director, member, partner, etc. depending on type of association) o Principal officers’ names and titles (if any) o Principal office address o Pennsylvania Department of State entity number Delaware’s Corporate Law and the Model Business Corporation Act Inspired the Act’s Additional Modernizations : Delaware’s sophisticated business statutes and courts generally favor corporate values. The American Bar Association created the Model Business Corporations Act for states to adopt, should they wish. It innovatively address a variety of business topics, including corporate creation, LLCs, corporate management structure, and shareholder’s rights. These progressing sources prompted some of the following updates: o Ratification procedures : the updated rules specified that: the board of directors must approve agreements. whenever a corporate statute, document (such as a shareholder’s agreement or incorporation certificate), or other applicable rule requires agreement, shareholder approval is mandatory. if a defective corporate action requires any kind of filing, the entity must also file a confirmation filing with the Pennsylvania State Department. o Abandonment of Business Opportunities : profit and nonprofit corporations may back out of business opportunities and shareholders are no longer required to notify the corporation of potential prospects. Abandonment may be unconditional, restricted, included in the articles of incorporation, or the board of directors may agree. o Officer Fiduciary Duties; Business Judgment Rule : some of the modified amendments stated that: a director’s obligation to investigate possible issues does not go past what the law requires. shareholders may limit the officer’s personal liability (with exceptions). a director sole duty is to the corporation (not creditors). o Forum Selection : the articles of incorporation may offer a court resolution site, which must include at least one Pennsylvania state court. It may designate other courts, so long as there are reasonable relationships between the corporation and the other territories. Stay tuned for future blogs to further clarify, detail, and explain the amendments. The Fleischmann Law Firm, P.C. The Fleischmann Law Firm specializes in business law and can guide your corporation through these important, time-sensitive changes. Its attorneys partner with you to minimize risk and liability, offer objective and fair assessment, and weigh all circumstances and options. They offer solid recommendations and provide superior representation. Attorney Craig J. Fleischmann and staff offer over three decades of experience, integrity, cost-effectiveness, value, and integrity. Contact the Fleischmann Law Firm today.

During the COVID-19 outbreak, a lot of people were itching for a reason to get out of their homes without spreading the coronavirus to others. This is when many people took advantage of being outdoorsy. Since the beginning of time, having fun in the great outdoors has been a wonderful pastime for people of all ages and places, even without the feeling of breaking the rules. Venturing through the arteries of Pennsylvania’s trail system is something that The Fleischmann Law Firms associate, Franqui Raffaele, chose to explore during quarantine, and still continues to use as a way to keep the stress away. The trail she explored the most was the Perkiomen Trail. This trail is a clean, family friendly environment that welcomes people of all ages to come and enjoy the beauty of nature. To hear more about why Franqui recommends the Perkiomen Trail, take a look at the article that she wrote for sidebar magazine HERE