Joining Closely Held Business Entities As Parties in Equitable Distribution Actions

Chris, a white man with grey hair, wears a white shirt; red, navy, and white striped tie; and black suit. By Chris Graebe

Full disclosure at the outset: I’m not a family law practitioner. My practice involves a wide array of business litigation matters, including so-called “business divorce,” but never actual divorce. I will retire happily never having represented a spouse in an equitable distribution matter. However, I have represented business clients who have been joined as parties in equitable distribution actions, and I thought it might be worthwhile to write something about the intersection between the law of equitable distribution and the law that governs the business entities that may be marital property. This post will focus on the law of LLCs, because that is the corporate form most often chosen for closely-held entities. Most, but not all, of the principles discussed here are equally applicable to corporations. Furthermore, this post focuses on the joinder of LLCs in cases involving a non-owner spouse. When a spouse owns an interest in the LLC at issue, the spouse has certain rights under the LLC Act and may have additional rights (or limitations) under the operating agreement. Finally, this post discusses, but does not take a deep dive into, the specific facts of Campbell v. Campbell, 241 N.C. App. 227, 773 S.E.2d 93 (2015) and Geoghagan v. Geoghagan, 254 N.C. App. 247, 803 S.E.2d 172 (2017), the two cases most often cited in connection with the joinder of closely held companies in equitable distribution actions. The reader is encouraged to read those opinions closely if she is not already familiar with them.

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Changes to R&D Deductions and Credits

John, a white man with brown hair and blue eyes, wears a blue jacket, white shirt, and blue tie. By John G. Hodnette

The Tax Cuts and Jobs Act of 2017 made changes effective in 2022 for the R&D deduction under Section 174 as well as the interaction between that deduction and the R&D credit under Section 41, as provided in Section 280C. Although the changes generally reduce the deduction in the first year by requiring capitalization and amortization over 5 years, they also reduce certain limits on the Section 41 credit.

For years prior to 2022, Section 174 provided a deduction for qualifying R&D expenses. Section 41 provided a credit based on qualifying R&D expenses. However, because both the deduction and the credit arise from the same activities, Section 280C(c) provides a limit on either the credit or the deduction so taxpayers are not double dipping tax benefits from the same R&D expenses.

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Evening and Part-Time Law School Students

Bryan, a white man with black hair, wears a white shirt, coral and blue striped tie, and blue blazer and black-rimmed glasses.By Bryan Howard

As a part-time law student working full-time and attending school in the evenings, I have experienced the lack of awareness and understanding that so many people and organizations have about the process. Working all day and then attending classes in the evenings does not leave much time for networking, attending extracurricular events, or getting creative in terms of finding future jobs. Some evening law students use their law degree to climb the hierarchy in their current job. In this situation, the law student likely has already developed a relationship with the employer and may not have a need to network outside of that setting; however, some evening law students go to law school for the purpose of leaving their current careers. These scenarios have different outcomes but the things that remain the same are that evening law students are non-traditional students, generally with life experiences and a work history, who have decided to dedicate nearly all their free time to obtain a law degree.

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Checking In: September 19, 2023

Compiled by Jessica Junqueira

Edwards Beightol Adds New Attorneys

Lama Sinno has joined the firm as of counsel. She has practiced law for 22 years. She has experience representing clients in workers’ compensation, social security, and employment claims; parents in abuse, neglect, and dependency claims filed by the Department of Social Services; juveniles in delinquency claims; and clients who have been charged with committing crimes. She has served as a Guardian ad Litem, and she has volunteered with the Junior Women’s League of Smithfield, My Kids Club, and the Juvenile Crime Prevention Committee. She is a graduate of Campbell Law School (2001) and the University of North Carolina at Chapel Hill, where she earned a bachelor’s degree in political science.

Jennifer L. Crawford, a trial lawyer, is now an attorney with the firm. Crawford is a member of the firm’s team handling Camp Lejeune Justice Act Cases. She received a B.A. from Muskingum University, where she earned highest honors. Crawford graduated from Campbell Law School in 2001. While in law school, she was a member of the Trial Advocacy Team and received The Barrister’s Award. After graduating from law school, she practiced with a criminal defense firm. Then, she joined the Wake County District Attorney’s office on the prosecutorial side. She served on the Governor’s Task Force for Domestic Violence, and in 2007, she moved to the Wake County Magistrate’s Office. She volunteers at a local nursing home and at the With Love from Jesus food pantry.

Hannah, Sheridan, & Cochran Welcomes New Attorney

Carter, a white man with brown hair, wears a white shirt, grey tie, and black suit.

Carter Cole has joined the firm. Cole, a native of Cary, earned a bachelor’s degree in political science from North Carolina State University. He is especially interested in wills, estates, wealth management, and trusts. He is a 2021 graduate of Campbell School of Law, where he served as a class representative for Campbell’s Student Bar Association and participated in the  Advocacy Program. He was recognized as the recipient of the Book Award in his estate planning class. Cole also earned a Master of Trust and Wealth Management degree, summa cum laude, from Campbell University’s Lundy-Fetterman School of Business (2021).

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The Intersection of Law, Policy, and Disability Resources: An Introduction to NC Vocational Rehabilitation

Kayla Britt is pictured in a white shirt and dark blazer in front of a dark background.By Kayla Britt

A lawyer’s responsibility extends beyond the law. As an individual who was able to become a lawyer based on the support and resources provided to me by the NCDHHS’s Division of Vocational Rehabilitation Services (“VR”), I consider it an ethical obligation to inform my communities about their services.

VR helps people with disabilities achieve their goals for employment and independence. If you have a disability that prevents you from achieving career success or independence in the community of your choice, VR can connect you to services and resources to help you meet your goals. VR can provide counseling, education, training, job placement assistance, assistive technology, and many other services, depending on what you need to meet your goals for competitive, integrated employment.

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Welcome to the 2023-24 Bar Year: A Message from the Chair

By Alexa Whiteside Alexa, a woman with blond hair, wears a pale pink t-shirt and stands in front of green foliage.

Dear Members of the Sports & Entertainment Law Section,

It is a joy and a pleasure to have been given the privilege to serve as the chair of the section for the 2023-24 bar year.

After three years of work-from-home and virtual events, I think we’ve reached that moment when so many of us are ready to meet each other in person again.

The legal industry is one that relies on relationships. As sports and entertainment professionals, that is amplified for us. We work, or are interested, in a field that seeks to motivate the general public to get out of their homes and into the theater or stadium or complex where our work or the work of our clients is being showcased. Even video games can have an in-person component. Who doesn’t love a good old-fashioned day at the arcade? Our clients are often global travelers going from one state or country to the next to play their games or shoot their next film or project or perform their latest album.

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A Letter to My Younger Self

Jonathan, a Black man with black hair and a beard, wears a pale blue shirt, yellow and blue striped tie, and navy suit.By Jonathan Bogues 

Dear 26-year-old Jonathan,

Congratulations are in order. You’ve worked hard, graduated from law school, and passed the North Carolina Bar Exam! You’re the first person in your family, immediate or extended, to obtain a graduate degree and reach these new heights. Your family is so proud of you and brags on you every opportunity they get.

You’ll think that you have arrived. You’ve made it. You’re on your way to Easy Street and everything that comes along with it: the corner office, the BMW with all the bells and whistles, the deluxe apartment in the sky.

But wait a minute and pump your brakes, as that is far from the case. Now the real work begins. You will encounter and go through things that law school and the bar exam did not prepare you for. You’ll start applying to jobs that you’re interested in and think you’re a good fit for; however, it seems like you will hear a million noes or “no, thank you” and sometimes no response at all before you’re finally able to land something. You’ll be hurt, discouraged, second guess yourself, wonder if you’re smart enough, and wonder if you have what it takes to be “successful,” but you won’t give up. You’ll persevere, you’ll grind it out, and your friends and family will support and encourage you, and have your back no matter what. Finally, you’ll land that first job, and you’ll happily accept it.

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IRS Attacks Tax-Deferred Attorney Fee Structures

Keith, a white man with brown hair, wears brown glasses, a white shirt, a yellow tie, and black suit.Chris, a white man with black hair, wears a white shirt, burgundy tie, and black suit.Mike, a white man with grey hair, wears a white shirt and navy suit.By Keith A. Wood, Chris W. Genheimer, and Michael J. Allen 

Sometimes publicity is a bad thing, and notoriety is even worse. That seems to be the case with respect to an apparent major change in the IRS’s views on the tax treatment of contingent fee deferral arrangements that plaintiffs’ attorneys often use.

Structured attorney fee deferral arrangements (also known as “fee structures”) have been around for decades. Almost 30 years ago, the U.S. Tax Court seemed to validate the deferred tax treatment of fee structures in its 1994 decision in Childs v. Commissioner, 103 TC 634 (1994), aff’d without published opinion, 89 F.3d 856 (11th Cir. 1996). From the time of that decision until December 16, 2022, the generally held belief was that a properly constructed fee structure would not be met with IRS disapproval.

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