Business Law: Avoiding the Unauthorized Practice of Law

William (Bill) Dolan, Esq. Dolan Law LLC 484-508-8582 (office) 302-547-3903 (direct) 888-547-4414 (fax) wdolan@dolanlawpa.com Business Law:Avoiding the Unauthorized Practice of Law

William (Bill) Dolan, Esq. Dolan Law LLC 484-508-8582 (office) 302-547-3903 (direct) 888-547-4414 (fax) wdolan@dolanlawpa.com Avoiding the Unauthorized Practice of Law • Introduction • Defining the Practice of Law • Public Policy Considerations with Respect to the Practice of Law • UPL General Examples • UPL Accountant/CPA Examples

William (Bill) Dolan, Esq. Dolan Law LLC 484-508-8582 (office) 302-547-3903 (direct) 888-547-4414 (fax) wdolan@dolanlawpa.com Avoiding the Unauthorized Practice of Law • Introduction • Corporate and Real Estate Lawyer • Former Member of the Pennsylvania UPL Committee • Goals of this Presentation

William (Bill) Dolan, Esq. Dolan Law LLC 484-508-8582 (office) 302-547-3903 (direct) 888-547-4414 (fax) wdolan@dolanlawpa.com Avoiding the Unauthorized Practice of Law 2. Defining the Practice of Law The Supreme Court of Pennsylvania: “An attempt to formulate a precise definition of the unauthorized practice of law would be more likely to invite criticism than to achieve clarity.”

William (Bill) Dolan, Esq. Dolan Law LLC 484-508-8582 (office) 302-547-3903 (direct) 888-547-4414 (fax) wdolan@dolanlawpa.com Avoiding the Unauthorized Practice of Law 2. Defining the Practice of Law The Supreme Court of Pennsylvania: “[t]hrough patient years of study, [a lawyer] has acquired an understanding of the law and obtained a license to engage in its practice, [and] he applies his knowledge in three principal domains of professional activity: • He instructs and advises clients in regard to the law, so that they may properly pursue their affairs and be informed as to their rights and obligations. • He prepares for clients documents requiring familiarity with legal principals beyond the ken of the ordinary layman – for example, wills and such contracts as are not of a routine nature. • He appears for clients before public tribunals to whom is committed the function of determining rights of life, liberty and property . . . .”

William (Bill) Dolan, Esq. Dolan Law LLC 484-508-8582 (office) 302-547-3903 (direct) 888-547-4414 (fax) wdolan@dolanlawpa.com Avoiding the Unauthorized Practice of Law • Public Policy Considerations with Respect to the Practice of Law • Primary goal of restricting the practice of law: The protection of the public from incompetent, unethical, or irresponsible representation. Manual Concerning the Unauthorized Practice of Law, Fifth Edition, PBA UPLC: “Lawyers’ training is regulated, their intellectual and moral qualifications are investigated, and their responsibility can be readily enforced by the court, whose officer they are.”

William (Bill) Dolan, Esq. Dolan Law LLC 484-508-8582 (office) 302-547-3903 (direct) 888-547-4414 (fax) wdolan@dolanlawpa.com Avoiding the Unauthorized Practice of Law • Public Policy Considerations with Respect to the Practice of Law • How is the practice of law regulated. • Section 2524 of Title 42 of the Pennsylvania code renders UPL a crime. • First offense, third degree misdemeanor. • Second or subsequent offense, first degree misdemeanor. • Violation of Unfair Trade Practices and Consumer Protection Law. • Pennsylvania Bar Association, Unauthorized Practice of Law Committee • UPL Committee Independent Actions • District Attorney • Attorney General • Professional Agencies • LWPR 8.3 Reporting Misconduct

William (Bill) Dolan, Esq. Dolan Law LLC 484-508-8582 (office) 302-547-3903 (direct) 888-547-4414 (fax) wdolan@dolanlawpa.com Avoiding the Unauthorized Practice of Law • LWPR Rule 8.3 Reporting Misconduct • Maintaining The Integrity Of The ProfessionRule 8.3 Reporting Professional Misconduct • (a) A lawyer who knows that another lawyer has committed a violation of the Rules of Professional Conduct that raises a substantial question as to that lawyer's honesty, trustworthiness or fitness as a lawyer in other respects, shall inform the appropriate professional authority. • (b) A lawyer who knows that a judge has committed a violation of applicable rules of judicial conduct that raises a substantial question as to the judge's fitness for office shall inform the appropriate authority. • (c) This Rule does not require disclosure of information otherwise protected by Rule 1.6 or information gained by a lawyer or judge while participating in an approved lawyers assistance program.

William (Bill) Dolan, Esq. Dolan Law LLC 484-508-8582 (office) 302-547-3903 (direct) 888-547-4414 (fax) wdolan@dolanlawpa.com Avoiding the Unauthorized Practice of Law • Public Policy Considerations with Respect to the Practice of Law • Rule 1.4: Communication • Rule 1.6: Confidentiality of Information • Rule 1.7: Conflict of Interest: Current Clients • Rule 5.4: Professional Independence of a Lawyer • Rule 7.4: Communication of Fields of Practice and Specialization • Rule 7.5: Firm Names and Letterheads

William (Bill) Dolan, Esq. Dolan Law LLC 484-508-8582 (office) 302-547-3903 (direct) 888-547-4414 (fax) wdolan@dolanlawpa.com Avoiding the Unauthorized Practice of Law • UPL General Examples • Legal document preparation: • Some specific examples are: • Power of attorney forms. • Immigration paperwork (with a narrow exception). • Separation/marriage termination agreements. • Will and trusts. • Trusts – Personal liability, revocable versus irrevocable, trusts that are deemed void • Wills – What happens upon divorce, can you write your spouse completely out of your Will, kids from prior marriages, minor children or issue. • Articles of incorporation, organization, and merger. • Operating agreement and bylaws.

William (Bill) Dolan, Esq. Dolan Law LLC 484-508-8582 (office) 302-547-3903 (direct) 888-547-4414 (fax) wdolan@dolanlawpa.com Avoiding the Unauthorized Practice of Law • UPL General Examples • Public Representation of Clients: • Appearing before zoning boards and governing bodies of municipalities in connection with land use applications. • Appearing with a debtor at his or her 341 meeting of creditors. • Representation of corporations by non-attorney officers in a court proceeding. • Representing a client at a real estate settlement. • Administrative and court appearances generally.

William (Bill) Dolan, Esq. Dolan Law LLC 484-508-8582 (office) 302-547-3903 (direct) 888-547-4414 (fax) wdolan@dolanlawpa.com Avoiding the Unauthorized Practice of Law • UPL Accountant/CPA Examples • Tax Appeals • Counseling, preparation and filing of real estate tax assessment appeal forms, and appearance before a county board of assessment. • Power-of-attorney does not cloak a layperson with the power to act as an attorney-at-law. • Probate • Preparation and filing of petitions for probate and other documents relating to a decedent’s estate with the Register of Wills and the Clerk of the Orphans Court and otherwise assisting personal representatives with the administration of decedent’s estates. • Preparing an inheritance tax return without the advice and direction of counsel for the personal representative.

William (Bill) Dolan, Esq. Dolan Law LLC 484-508-8582 (office) 302-547-3903 (direct) 888-547-4414 (fax) wdolan@dolanlawpa.com Avoiding the Unauthorized Practice of Law • UPL Accountant/CPA Examples • Associations • Forming associations (including but not limited to corporations, partnerships, limited liability companies, business trusts, and limited liability partnerships. • Advertising such formations. • Advising on the type of entity beyond tax and accounting issues. • “Tax and accounting issues comprise only a small portion of the total overall analysis required to determine the type of organization that is best suited for the particular client under the particular set of circumstances.” • Issues surrounding association formations.

William (Bill) Dolan, Esq. Dolan Law LLC 484-508-8582 (office) 302-547-3903 (direct) 888-547-4414 (fax) wdolan@dolanlawpa.com Avoiding the Unauthorized Practice of Law • UPL Accountant/CPA Examples • Associations • Issues surrounding association formations. • LLCs • Certificate of Organization/Certificate of Formation (PA/DE, NJ) • Manager/Series (changing) • Title 15 - CORPORATIONS AND UNINCORPORATED ASSOCIATIONS • Chapter 89 - Limited Liability Companies • 8913 - Certificate of organization. • § 8913. Certificate of organization. • The certificate of organization shall be signed by each of • the organizers and shall set forth in the English language:

William (Bill) Dolan, Esq. Dolan Law LLC 484-508-8582 (office) 302-547-3903 (direct) 888-547-4414 (fax) wdolan@dolanlawpa.com Avoiding the Unauthorized Practice of Law • § 8913. Certificate of organization. • The certificate of organization shall be signed by each of the organizers and shall set forth in the English language: • (1) The name of the limited liability company, unless the name is in a foreign language, in which case it shall be set forth in Roman letters or characters or Arabic or Roman numerals. • (2) Subject to section 109 (relating to name of commercial registered office provider in lieu of registered address), the address, including street and number, if any, of its initial registered office in this Commonwealth. • (3) The name and address, including street and number, if any, of each of the organizers. • (4) If a member's interest in the company is to be evidenced by a certificate of membership interest, a statement to that effect. • (5) If management of the company is vested in a manager or managers, a statement to that effect. • (6) If the certificate of organization is to be effective on a specified date, the hour, if any, and the • month, day and year of the effective date.

William (Bill) Dolan, Esq. Dolan Law LLC 484-508-8582 (office) 302-547-3903 (direct) 888-547-4414 (fax) wdolan@dolanlawpa.com Avoiding the Unauthorized Practice of Law • § 8913. Certificate of organization. • The certificate of organization shall be signed by each of the organizers and shall set forth in the English language: • (7) If the company is a restricted professional company, a statement to that effect, including a brief description of the restricted professional service or services to be rendered by the company. • (8) Any other provision, whether or not specifically authorized by or in contravention of this chapter, that the members elect to set out in the certificate of organization for the regulation of the internal affairs of the company, except where a provision of this chapter expressly provides that the certificate of organization shall not relax or contravene any provision on a specified subject. But see section 8915 (relating to modification by agreement). A provision included in the certificate of organization under this paragraph shall be deemed to be a provision of the operating agreement for purposes of any provision of this chapter that refers to a rule as set forth in the operating agreement.

William (Bill) Dolan, Esq. Dolan Law LLC 484-508-8582 (office) 302-547-3903 (direct) 888-547-4414 (fax) wdolan@dolanlawpa.com

William (Bill) Dolan, Esq. Dolan Law LLC 484-508-8582 (office) 302-547-3903 (direct) 888-547-4414 (fax) wdolan@dolanlawpa.com Avoiding the Unauthorized Practice of Law • UPL Accountant/CPA Examples • Associations • Issues surrounding association formations. • LLCs • Certificate of Organization/Certificate of Formation (PA/DE, NJ) • Series/Manager • Operating Agreement/LLC Agreement (PA, NJ/DE) • Type of Management • Member-managed • Manager-managed • Board-managed • Fiduciary duty standard • Allocation of profits and losses (default versus elected) • Distributions (required versus elected) • Who has the authority to do what • Who has the responsibility to do what • Responsible tax party

William (Bill) Dolan, Esq. Dolan Law LLC 484-508-8582 (office) 302-547-3903 (direct) 888-547-4414 (fax) wdolan@dolanlawpa.com Avoiding the Unauthorized Practice of Law • UPL Accountant/CPA Examples • Associations • Issues surrounding association formations. • B. Corporations • Articles of Incorporation/Certificate of Incorporation (PA/DE, NJ) • 102(b)7 • Bylaws

William (Bill) Dolan, Esq. Dolan Law LLC 484-508-8582 (office) 302-547-3903 (direct) 888-547-4414 (fax) wdolan@dolanlawpa.com Avoiding the Unauthorized Practice of Law • UPL Accountant/CPA Examples • Bankruptcy • Types: • Chapters 7, 11, and 13 • Issues surrounding bankruptcy. • Who can file and when • Fraudulent transfers (6 months/2 years) • Legal effect of a petition filing • Secured creditors • Unsecured creditors

William (Bill) Dolan, Esq. Dolan Law LLC 484-508-8582 (office) 302-547-3903 (direct) 888-547-4414 (fax) wdolan@dolanlawpa.com Avoiding the Unauthorized Practice of Law • Issues surrounding association formations. C. Piercing the Corporate Veil

William (Bill) Dolan, Esq. Dolan Law LLC 484-508-8582 (office) 302-547-3903 (direct) 888-547-4414 (fax) wdolan@dolanlawpa.com Avoiding the Unauthorized Practice of Law • Issues surrounding association formations. D. Breach of Fiduciary Duties • Who owes fiduciary duties and to whom, generally? • A fiduciary duty exists in “a situation where one person reposes special trust in and reliance on the judgment of another or where a special duty exists on the part of one person to protect the interests of another.” • Officers to the company and to shareholders. • Directors to the company and to shareholders • Controlling shareholder to minority shareholders. • Partners of a partnership to other partners. • Members of an LLC to the company and other members. • Manager of an LLC to the company and the members. • What duties are owed? • Duty of Care • Duty of Good Faith • Duty of Loyalty

William (Bill) Dolan, Esq. Dolan Law LLC 484-508-8582 (office) 302-547-3903 (direct) 888-547-4414 (fax) wdolan@dolanlawpa.com Avoiding the Unauthorized Practice of Law • Issues surrounding association formations. • Breach of Fiduciary Duties

William (Bill) Dolan, Esq. Dolan Law LLC 484-508-8582 (office) 302-547-3903 (direct) 888-547-4414 (fax) wdolan@dolanlawpa.com Avoiding the Unauthorized Practice of Law • Issues surrounding association formations. • Hypothetical Situation Jon and Bev decide to make a movie.

William (Bill) Dolan, Esq. Dolan Law LLC 484-508-8582 (office) 302-547-3903 (direct) 888-547-4414 (fax) wdolan@dolanlawpa.com Avoiding the Unauthorized Practice of Law • A potential investor says he’s in if the business is taxed as a partnership. They call their accountant for advice on setting up the business. Their accountant gives them the following advice: • LLCs have a flexible • taxation structure and can be taxed as a partnership or a corporation; and • ownership structure; • LLCs afford the parties wide latitude in setting out the rights and obligations of the parties; and • LLCs provide liability protection for the business owner like a shareholder in a corporation. • UPL

William (Bill) Dolan, Esq. Dolan Law LLC 484-508-8582 (office) 302-547-3903 (direct) 888-547-4414 (fax) wdolan@dolanlawpa.com Avoiding the Unauthorized Practice of Law • Jon and Bev love the LLC idea, so the accountant forms the entity (Picture LLC) and has the corporate kit sent directly to Jon and Bev, who upon receipt immediately place it on Jon’s bookshelf with his other corporate documents. • UPL • Corporate Formalities – PCV Factor. • Jon and Bev need more money, so they decide to start pitching potential investors for capital. • Securities Violations – Fraud – PCV Factor.

William (Bill) Dolan, Esq. Dolan Law LLC 484-508-8582 (office) 302-547-3903 (direct) 888-547-4414 (fax) wdolan@dolanlawpa.com Avoiding the Unauthorized Practice of Law • Jon and Bev find that the movie business is tougher than they thought, so they want to generate some cash flow, so they can make some money for their time and effort. Luckily, they have a friend at Budweiser, who convinces the head of marketing to make a $100,000 product placement deal with Picture LLC to have Budweiser beer in the movie. Ecstatic, Jon uses his $50,000 to put a deposit down on a new car. Bev puts a big dent into her husband’s gambling debts with her half. • Duty of Loyalty – Breach of Fiduciary Duty.

William (Bill) Dolan, Esq. Dolan Law LLC 484-508-8582 (office) 302-547-3903 (direct) 888-547-4414 (fax) wdolan@dolanlawpa.com Avoiding the Unauthorized Practice of Law • While doing her grocery shopping at Target, Bev learns that her Target card is maxed out. Unshaken by the embarrassment of her card denial, Bev pulls out her Picture LLC Master Card and completes her purchase with confidence. • Co-Mingling Assets and Liabilities – PCV Factor. • With insufficient capital to complete the film due to some unpredicted expenses, Jon and Bev decide to trim the production budget. By allowing Picture LLC to self-insure, they save twenty thousand dollars in overhead while preserving the creative integrity of the picture. On top of the world, Jon and Bev spring for an all expenses paid trip for them and their families to go to Caesars’ in Atlantic City, on Picture LLC. • Undercapitalization – PCV Factor. • Co-Mingling Assets and Liabilities – PCV Factor.

William (Bill) Dolan, Esq. Dolan Law LLC 484-508-8582 (office) 302-547-3903 (direct) 888-547-4414 (fax) wdolan@dolanlawpa.com Avoiding the Unauthorized Practice of Law • Bob, the second assistant director tripped on some loose wires that, contrary to custom, were not affixed to the floor. Sadly, Bob landed on several glass bottles of Budweiser, which tore up his hands and will prevent him from ever playing professional badminton. With no other option, Bob sues Picture LLC for negligence. Unfortunately, Bev’s husband went on a bender while they were in Atlantic City and disappeared for three days with Picture LLC’s debit card, leaving the bank account drained. So, Picture LLC has no money (or insurance coverage) to compensate Bob. • Undercapitalization – PCV Factor • Negligence – No Assets – Fraud – PCV Factor.

William (Bill) Dolan, Esq. Dolan Law LLC 484-508-8582 (office) 302-547-3903 (direct) 888-547-4414 (fax) wdolan@dolanlawpa.com Avoiding the Unauthorized Practice of Law • Since the Atlantic City trip left Picture LLC with no money to pay for food service, Jon asks Pizza Brother’s, Inc., the • business he uses to cater his other company’s events, • to bring a food cart to the set. Pizza Brother’s, Inc. • requests payment in advance in accordance with its • normal business practices for a new customer. Jon tells the • sales person that “it’s all one and the same. It’s all under me.” • Identity Confusion – PCV Factor • Holding Out – Personal Guaranty or Guaranty by Other Company – General Liability by Contract.

Business Law: Avoiding the Unauthorized Practice of Law