Mid-Atlantic M&A Trends, Maryland’s New Paid Sick Leave Law, and More on My Radar in 2018

Howard K. KurmanPrincipal, Offit│Kurman

Believe it or not, we’re already three months into 2018. So far, this year has seen a mix of positive, tragic, and downright surprising news stories: residents of Hawaii received a missile threat alert that turned out to be a false alarm, Elon Musk sent a Tesla into space, the federal government shut down—twice, the Eagles won Super Bowl LII, and the Dow Jones experienced its biggest one-day point drop in history. And then there was the horrific shooting at Marjory Stoneman Douglas High School, which claimed the lives of 17 people and left 15 others wounded; my thoughts and sincere condolences go out to the victims and their families.

While these stories grab our attention, and deservedly so, I’d like to take this opportunity to direct your awareness to a few news items, developments, and trends that you may have missed, and which stand to impact your business and household this year. Here are four legal matters to have on your radar in 2018:

Mid-Atlantic M&A Outlook in 2018

One trend I hope to see continue in 2018 is the robust mergers and acquisitions (M&A) demand here in the Mid-Atlantic region. Last year brought tremendous demand for adding bolt-on businesses as well as the desire to diversify clientele, geographies, and skill through acquisitions. This demand was across industries, but especially in government and commercial IT and health care.

Here at Offit Kurman, we represented numerous companies involved in these transactions. Recent deals and financial proceedings in which we played a role include…

Additionally, I have had the pleasure of speaking to leaders of these companies and others in my Pinnacles video interview series, which launched late last year. For more M&A news, and to learn about Offit Kurman’s Business Law and Transactions Practice Group, click here.

Maryland’s Mandatory Paid Sick Leave Law

In the past couple weeks, I have received a number of questions from clients about Maryland’s new mandatory paid sick leave law, known as the Healthy Working Families Act. The law, which has stirred controversy and provoked resistance from business owners, overcame Governor Larry Hogan’s veto in January and went into effect on February 11.

What does the new law entail? My colleagues Russell Berger and Sarah Sawyer published an excellent article that answers the question. They write:

“[T]he main impact of the law is that businesses with fifteen or more employees in Maryland will need to provide at least 40 hours of paid sick or safe leave per year to qualifying employees.  Employers with fourteen or fewer employees will be required to provide the same leave, but there is no requirement that the leave is paid.  Many existing leave policies may satisfy the requirements of this new law.  However, adjustments may be necessary or optimal given certain details of the paid sick leave law, specifically as it pertains to the accrual of paid sick leave, carry over from year to year of paid sick leave, and employee eligibility (which all could differ from existing paid time off policies).  Obviously, any employer with fifteen or more employees that do not have a paid leave plan will, at a minimum, need to adopt a paid sick leave plan.”

Sarah and Russell discussed the new law further with the Maryland Daily Record and the Baltimore Business Journal, explaining that paid sick leave implementation and compliance strategies will vary from organization to organization. As Russell commented: “Businesses should be pulling up their existing policies and start going through a process to determine if they are in compliance. If it is, that’s great. If not, the business needs to determine what steps it needs to take to get into compliance.”

For more information and guidance, make sure to catch up on the recording of Offit Kurman’s recent webinar, “Paid Sick Leave: What Happens Next?”

Business Implications of the New Federal Tax Code

News surrounding the tax reform law enacted at the end of 2017 has been largely focused on implications for C Corporations. However, sole proprietors and owners of S corporations, limited liability companies, partnerships, and other “pass through” companies have new tax obligations and opportunities as well. These individuals should be aware of how the law affects them, especially with respect to the intersection between their business lives and their personal returns.

The new Internal Revenue Code does not change how pass through companies are taxed, but it does allow many owners to deduct 20% of their qualified business income (QBI) on their annual returns. QBI comprises any domestic income besides reasonable compensation associated with S corporations and guaranteed payments associated with partnerships and LLCs. Unlike an itemized deduction, the QBI deduction is considered an “above the line” or “between the lines” deduction, meaning it reduces overall taxable income regardless of whether an individual claims the standard deduction.

Any business is eligible for the full 20% deduction, so long as the owner’s taxable income falls below $157,500 (or $315,000 for married owners filing jointly). Note that businesses in specified service industries—such as health care, accounting, law, and professional services—cannot claim the deduction if their income exceeds $157,500 (or $315,000 for joint filers).

In light of these changes, many business owners have started to evaluate their tax burdens with renewed vigor and consider whether different business structures could present tax savings. For more information, read my article here.

What’s on your radar for the remainder of the year? If you own a business, or are interested in launching your next venture, now is a great time to check in and discuss your strategy with a trusted advisor. If you’d like guidance on anything mentioned above, or any business law matter, I welcome you to contact me with your questions, comments, and thoughts. Click here to get in touch with me.

If you would like to speak to an entrepreneurially minded legal advisor about tax-related issues or any business law matter, please contact me at [email protected] .