Paperwork change needed

Recent amendments to Pennsylvania law have those in the construction industry scrambling to change the documents they use to conduct business.

These changes alter the way the construction industry handles mechanic's liens. A mechanic's lien creates a priority of payment for the value of labor and materials to construct or improve a building. For decades, Pennsylvania law has stipulated who can file a mechanic's lien and how contractors and subcontractors can waive their rights to a lien. Historically, construction contracts have included standard clauses to waive lien rights.

The new amendments, which went into effect on Jan. 1, change who has lien rights, when a lien can be obtained and under what conditions lien rights can be waived. Now, unless strict conditions are met, contractors, subcontractors, and even some materials suppliers, are unable to waive their mechanic's lien rights in advance.

These and other amendments to Pennsylvania's mechanic's lien law are changing how owners, contractors and subcontractors interact. As a result, most standard forms are now obsolete. Businesses in the construction industry should review all their standard contracts, subcontracts, purchase orders and related documents to make sure they comply with the new law.

-- Joshua R. Lorenz,
Meyer Unkovic & Scott,
jrl@muslaw.com

A winning succession plan

Widely cited statistics indicate that only 30 percent of family businesses survive into a second generation and only 15 percent survive into a third generation. These statistics indicate that the primary causes of the typical business succession failure are attributable to how successor family members interact and to heirs not being prepared to manage the business.

Carefully formulating a strategic plan is critical in assuring the future success of the business. When performing a succession plan, the following major steps should be followed:

Clarify the goals and expectations of both the senior and younger generations and reach agreement to proceed.

Identify the lifestyle needs of the senior generation.

Determine the value of the business because the ownership interest in the family business is the most significant asset held by the family.

Consideration has to be given to the company's ability to leverage its balance sheet to finance a transaction as well as the cash flow of the business to support future debt service related to a transaction.

Evaluate the transfer between family members by considering the net of taxes to the entire family.

Structure a transfer that accomplishes everyone's goals, is fair, affordable by the company and tax efficient.

With patience, good advisers, a strong commitment and an appreciation for the complexity of this process, family businesses can achieve an effective succession plans that ensures a strong legacy for their family businesses.

-- Emanuel V. DiNatale,
Alpern Rosenthal,
edinatale@alpern.com