Friday, January 30, 2009

Study Finds Settling Lawsuits Often More Cost Effective Than Litigating Them Through Trial

A 2008 study by the Journal of Empirical Legal Studies, as reported last year in a New York Times article, Study Finds Settling Is Better Than Going to Trial, found that -
.... most of the plaintiffs who decided to pass up a settlement offer and went to trial ended up getting less money than if they had taken that offer.

"The lesson for plaintiffs is, in the vast majority of cases, they are perceiving the defendant’s offer to be half a loaf when in fact it is an entire loaf or more," said Randall L. Kiser, a co-author of the study and principal analyst at DecisionSet, a consulting firm that advises clients on litigation decisions.

Defendants made the wrong decision by proceeding to trial far less often, in 24 percent of cases, according to the study; plaintiffs were wrong in 61 percent of cases. In just 15 percent of cases, both sides were right to go to trial — meaning that the defendant paid less than the plaintiff had wanted but the plaintiff got more than the defendant had offered.

The vast majority of cases do settle — from 80 to 92 percent by some estimates, Mr. Kiser said — and there is no way to know whether either side in those cases could have done better at trial. But the findings, based on a study of 2,054 cases that went to trial from 2002 to 2005, raise provocative questions about how lawyers and clients make decisions, the quality of legal advice and lawyers' motives....

Wednesday, January 14, 2009

How to Avoid an IRS Tax Audit: Incorporate Your Small Business

One tip for Dodging a Tax Audit, per the Wall Street Journal's reporting: Incorporate. The WSJ reports that the IRS continues to target Schedule C filers for tax audits and additionally notes that the IRS will sometimes act on an anoymous tip regarding a taxpayer's non-compliance with U.S. tax law.
[T]he overall audit rate this year is likely to remain about the same as last year, says Linda Stiff, IRS deputy commissioner for services and enforcement. But officials are likely to continue their emphasis on high-income taxpayers. Your chances of getting audited are especially high if you work for yourself, file what's known as a Schedule C form for sole proprietors and deal in large amounts of cash. IRS research has shown especially large amounts of noncompliance among this group.

"Like Willie Sutton said about banks, the IRS is looking at high-income, self-employed Schedule C filers because that's where the money is," says Martin Laffer, a certified public accountant at Laffer & Gottlieb in Beverly Hills, Calif. For example, he says one of his clients being audited owns several retail stores and also is a consultant.
See also:

Time to Incorporate?
California incorporation

Monday, January 12, 2009

Some Californians Flee State for Greener Pastures

Go East, young man? Californians look for the exit, Associated Press, January 12, 2009:
The number of people leaving California for another state outstripped the number moving in from another state during the year ending on July 1, 2008. California lost a net total of 144,000 people during that period — more than any other state, according to census estimates. That is about equal to the population of Syracuse, N.Y.

The state with the next-highest net loss through migration between states was New York, which lost just over 126,000 residents.

California's loss is extremely small in a state of 38 million. And, in fact, the state's population continues to increase overall because of births and immigration, legal and illegal. But it is the fourth consecutive year that more residents decamped from California for other states than arrived here from within the U.S.

A losing streak that long hasn't happened in California since the recession of the early 1990s, when departures outstripped arrivals from other states by 362,000 in 1994 alone.

In part because of the boom in population in other Western states, California could lose a congressional seat for the first time in its history.

Why are so many looking for an exit?

Among other things: California's unemployment rate hit 8.4 percent in November, the third-highest in the nation, and it is expected to get worse. A record 236,000 foreclosures are projected for 2008, more than the prior nine years combined, according to research firm MDA DataQuick. Personal income was about flat last year.

With state government facing a $41.6 billion budget hole over 18 months, residents are bracing for higher taxes, cuts in education and postponed tax rebates....
March 2009 update:

Related: Corporate oil booms in low-tax Switzerland, Reuters, March 12, 2009 ("[A] wave of energy companies has in the last few months announced plans to move to Switzerland -- mainly for its appeal as a low-tax corporate domicile that looks relatively likely to stay out of reach of Barack Obama's tax-seeking administration.") and California Scheming: What One-Party Rule Is Doing To Once-Golden State

Thursday, January 1, 2009

California Secretary of State and FTB To Introduce LLC Suspension Program in 2009

Happy new year. And with the new year comes changes to various state and federal laws. Among others:

The new cell phone law prohibits text messaging or reading or writing emails while driving.

Covered employers will be affected by changes to the federal Family and Medical Leave Act (FMLA) and should have their employee manuals reviewed and revised accordingly. A new workplace poster is available here: 2009 FMLA poster

The definition of a disability under the Americans with Disability Act (ADA) has been broadened.

The time limits for filing a discrimination claim under the Civil Rights Act of 1964 and the Age Discrimination in Employment Act were extended.

In 2009, the California Franchise Tax Board (FTB) and Secretary of State (SOS) will be allowed to suspend limited liability companies (LLCs) that do not comply with various FTB and SOS filing and tax payment requirements. The FTB and SOS already do this for corporations, but up until now, the law had prohibited them from doing so with LLCs. This changes makes proper business entity maintenance, already crucial for ensuring maximum tax and limited liability advantages, all the more important. LLCs that are not being used should be dissolved while still in active status.

See also: 2009, Time To Incorporate?