Starting in 2025, Pennsylvania requires entities organized under Pennsylvania law or authorized to do business within the Commonwealth to file mandatory annual reports (Act 122). Learn more about the PA annual report filing requirements and use this four-step checklist to ensure compliance for your business! 

The importance of filing your PA annual report

While this is a newer requirement for Pennsylvania, most states have annual or biannual reporting requirements. The Act 122 report consists of reporting a variety of information and paying a small filing fee to the Pennsylvania Department of State (see below). Maintaining compliance and filing your company’s report in a timely manner is critical to avoid penalties. Non-compliance penalties may include the dissolution or termination of the entity, as well as the loss of protection of the entity’s name.

The report must be filed annually with the Pennsylvania Department of State. Each report must contain accurate information at the time it is submitted. There are no requirements to amend a previous report if the information on the report changes. Postcard notices will be sent by the Pennsylvania Department of State, at least two months prior to your annual deadline reminding you of your reporting obligation. These postcards will be mailed to your registered address (not P.O. boxes) or to your company’s Commercial Registered Office Provider, if applicable. 

If you are unsure where to start, consider the PA Annual Report checklist below, or reach out to our Corporate, Business & Banking team with questions.

1) Create a list of all the PA entities that you own or control, identify their subsidiaries, and gather all organizational documents

Act 122 requires every separate legal entity formed or registered to do business in the Commonwealth of Pennsylvania to submit its own report. So, the first step is to get organized. Identify all your PA entities and subsidiaries, and locate the relevant organizational documents (e.g., operating agreements; bylaws; shareholders’ agreements). This will give you a sense of how many reports need to be filed and the information which will need to be reported. 

2) Determine if your business is required to report

Not all businesses must report. Businesses such as general partnerships, authorities (all subtypes), financial institutions and credit unions are exempt and not required to file an Act 122 report.

Reporting is required for all other entities formed or registered to do business in Pennsylvania. This includes foreign and domestic businesses such as: 

• business corporations
• nonprofit corporations
• limited liability companies
• limited liability partnerships
• limited partnerships
• professional associations, and 
• business trusts

Once you determine if your business is required to file an Act 122 report, you next must determine when your yearly deadline is to file:

• June 30th – foreign and domestic corporations (both business and nonprofit)
• September 30th – foreign and domestic limited liability companies
• December 31st – all other types of entities 

Please note: this is an annual requirement, meaning you must file them each year.

3) If you determine you are a reporting entity, organize and identify the necessary information

Act 122 requires reporting companies to report the following information to the Pennsylvania Department of State, via the Corporation Bureau:

• Business name
• Jurisdiction of formation
• Registered office address
• Name of at least one governor (director, general partner, LLC manager or LLC member with material management responsibility, etc. depending on type of association)
  • Under the Act, “governor” is defined as “a person by or under whose authority the powers of an association are exercised and under whose direction the activities and affairs or the association are managed pursuant to the organic law and organic rules of the association.” 
• Names and titles of the principal officers, if any, as determined by its governors
  • While “principal officers” is not defined, they include the president, secretary, treasurer, or people who shall act as such, regardless of the name or title by which they go by.
• Address of the principal office
  • This would be the principal executive office of an association, whether or not the office is located in the Commonwealth.
• Entity number issued by the Pennsylvania Department of State

4) Maintain compliance through a single person; file the report

Depending on the type of entity you have, you may already have a compliance officer or someone who oversees compliance in the company. For most companies required to file a report, a specific administrator or officer should be assigned. This person should be responsible for collecting all the information noted in step three above and filing the report each year. This will streamline the process and keep the information organized. This person can also sign up for reminders and other notifications regarding the annual reporting requirements.

You can file your report directly, or ask a lawyer or other agent, to file on your behalf. The following steps are how to file the report on your own:

1. Reports can be filed online at https://file.dos.pa.gov
2. Search for the company name under “Business Search”
3. Click “File Annual Report”
4. Enter the necessary information
5. Pay the $7 filing fee

Support for your PA Annual Report and beyond

For new businesses, this checklist may seem overwhelming. Determining reporting obligations, knowing what information is necessary to collect, when to file, and filing the Act 122 report may require the assistance of professional advisors such as lawyers and accountants.

Do not wait until your filing deadline period to determine your responsibilities, as you risk significant penalties for non-compliance.  Please check in with your attorney or a member of FLB’s Corporate, Business & Banking Team to help you navigate the PA annual report filing requirements.

This blog was co-authored by Jordan M. Ohl and Elyse C. Pillitteri.

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In the past two years, there have been nearly 20,000 crashes, leading to almost 12,000 injuries and over 100 deaths in Pennsylvania. Now, it is officially against the law for any driver to use a phone, or an interactive mobile device (“IMD”), while driving a motor vehicle within the state.

What is Paul’s Miller’s Law?

Enacted on June 5, 2025, with a twelve-month warning period ending on June 5, 2026, “Paul Miller’s Law” makes it illegal to use hand-held electronic devices while driving, even when stopped temporarily whether that be due to heavy traffic, a red-light, a stop-sign, or any other delay. However, drivers may still use hands-free technology for phone calls, navigation, and music. The law was named after Scranton-born Paul Miller, who was killed in a 2010 crash when a distracted driver crossed the center median and collided head-on into Paul’s car.

What are Penalties for Driving While Using a Device? 

Pennsylvania already strongly enforces a ban on texting while driving, and during the one-year warning period the state’s police reported that they issued over 1,600 warnings. With the warning period being officially over, law enforcement can now issue summary citations to violators of Paul Miller’s law 

The fine accompanying a citation under Paul Miller’s Law is $50 but does not impose any points or create a criminal record. It is also important to note that consequences may also be imposed by an out-of-state driver’s home state. 

It is reported that in the first three days after the law’s official enactment this month, police throughout the Commonwealth said they issued nearly 700 traffic citations and over 300 warnings related to Paul Miller’s Law. 

What is Considered “Use of an Interactive Mobile Device”?

The law is very strict and gives officers expansive power to stop and cite violating drivers. Under the law, “use” of an interactive mobile device includes: 

1. Using at least one hand to hold, or supporting with another part of the body, an interactive mobile device; 
2. Dialing or answering an interactive mobile device by pressing more than a single button; or 
3. Reaching for an interactive mobile device in a manner that requires a driver to maneuver so that the driver is no longer in a seated driving position, restrained by a properly installed and adjusted seat belt.

Hands-Free Driving in the Lehigh Valley

Officials in the Lehigh Valley have been outspoken in their support of the law, emphasizing how large of an issue distracted driving is on roadways in the local area, and the state as a whole. Distracted driving is fatal, and we see the consequences of that on a daily basis. Paul Miller’s Law is a strong legislative step forward in reversing the distracted driving habits that plague both the state and the nation.

At Fitzpatrick, Lentz & Bubba, P.C., we are more than prepared and ready to assist anyone with legal issues, questions, or concerns related to Paul Miller’s law and its enforcement. Please contact any of our attorneys if you or anyone you know may need assistance relating to this new Pennsylvania law, and please drive responsibly.

Maxwell Allanson-Dundon co-authored this blog.

The post Your Guide to Paul Miller’s Law: Hands-Free Driving in PA appeared first on Fitzpatrick Lentz & Bubba, P.C..

Mergers and acquisitions in the lower middle market (LMM) continue to evolve, shaped by demographic shifts, capital availability, and buyer expectations. Attorney Ken Charette, chair of FLB’s Mergers & Acquisitions practice, took part in a panel discussion, which provided legal, advisory, and financial perspectives on today’s market conditions, as well as steps business owners should take when preparing for a sale. Check out this summary of this conversation (and fill out the form at the bottom for a free download of the entire recorded webinar).

Current M&A Trends: A Strong but Cautious Market

In 2025, deal activity in the lower middle market remained robust. Private equity firms continued to deploy significant capital, often through roll‑up strategies that consolidated complementary businesses to drive scale and profitability. At the same time, demographic forces, notably the “silver tsunami” of retiring baby‑boomer owners, created a steady pipeline of quality companies coming to market.

What about interest rates? While many buyers in this segment fund deals directly from their balance sheets, bank financing still influences valuations and deal appetite. Expected rate declines could further stimulate activity through 2028.

One recent notable shift: buyers are more cautious. They are conducting deeper due diligence and increasingly relying on deferred purchase mechanisms such as earnouts to bridge valuation gaps and mitigate risk.

The Deal Timeline: Preparation Is Everything

A typical M&A process spans six to nine months, moving through preparation, marketing, LOI negotiation, diligence, closing, and post‑closing transition, with preparation being the single most important factor in achieving a smooth process and strong valuation.

Owners who begin planning one to three years before a sale have more options: financial, tax‑related, operational, and personal. Early preparation allows advisors to identify issues, strengthen financial reporting, and position the business in the most compelling way for buyers.

LOI Stage: Setting the Foundation for a Successful Deal

Before a buyer submits a Letter of Intent (LOI), they typically receive a confidential information memorandum (CIM) and preliminary financials. Investment bankers play a central role here, crafting a narrative that highlights the company’s strengths, growth opportunities, and market position.

Once a LOI is on the table, the tone of negotiations becomes clearer. Even the NDA stage can foreshadow how a buyer will behave later, whether they are collaborative or overly aggressive. Sellers should remember that signing an NDA does not obligate them to disclose everything immediately; information can be released in stages as trust builds.

Quality of Earnings: The Financial Backbone of the Deal

A Quality of Earnings (QoE) analysis is one of the most critical components of preparation. Buyers rely on QoE reports to validate the company’s true cash‑flow‑generating ability, and sellers increasingly commission their own “sell‑side QoE” to get ahead of issues.

A QoE typically:

• Reconciles reported EBITDA to a normalized, adjusted EBITDA
• Identifies non‑recurring, discretionary, or personal expenses
• Highlights related‑party transactions
• Evaluates customer concentration, revenue quality, and margin trends
• Assesses whether monthly financials reflect year‑end adjustments

A strong QoE package accelerates diligence, builds buyer confidence, and often improves valuation.

Tax & Estate Planning: Start Early, Not After the LOI

Another top tip to keep in mind is do not wait until a deal is underway to think about tax and estate planning.

Early planning may include:

• Updating wills and trusts
• Gifting or transferring ownership interests
• Reviewing shareholder or operating agreements
• Identifying required consents for a future sale
• Evaluating entity structure for tax efficiency

Once an LOI is signed, many planning opportunities disappear. Starting early ensures owners can maximize after‑tax proceeds and align the transaction with long‑term family goals.

Employee Transitions: Protecting the People Who Built the Business

For many owners, ensuring key employees are taken care of ranks as high as maximizing valuation. Buyers also value stability; retaining key personnel reduces risk and supports continuity.

Common tools include:

• Stay bonuses or change‑of‑control bonuses
• Phantom equity or profit‑sharing arrangements
• New employment agreements
• Opportunities for equity in the buyer’s organization

When addressed early, these strategies help align interests, strengthen the company’s story, and often increase purchase price.

The Human Side: Life After the Sale

Beyond the financial and operational considerations, owners should reflect on their personal goals. Many have spent decades building their companies, and the transition can be emotional. Whether the next chapter involves travel, family time, philanthropy, or new ventures, clarity on post‑sale life helps guide decisions throughout the process.

Selling a business is one of the most significant financial and personal decisions an owner will ever make. The most successful outcomes come from early preparation, a strong advisory team, and a thoughtful approach to both the numbers and the people involved.

In today’s active but increasingly cautious market, readiness and strategy are more important than ever.

M&A opportunities are complex! Gain access to “M&A From A-Z,” your guide to buying or selling a business as shared in a recorded webinar from 2025, featuring Attorney Ken Charette, M&A Advisor Rick Calabrese, and Financial Services Advisor Dave Campbell, when you complete this form:

The post Navigating the Lower Middle Market: Insights on M&A Trends, Preparation, and Successful Transitions appeared first on Fitzpatrick Lentz & Bubba, P.C..

As organizations navigate 2026, HR leaders are facing a rapidly evolving employment law landscape marked by shifting judicial interpretations, changing enforcement priorities, and increased state-level activity. The result? Greater uncertainty and greater responsibility for HR professionals to stay proactive, informed, and strategic. Check out these HR tips for staying compliant in 2026. 

A More Unpredictable Legal Environment (and More Trials?)

Recent federal court decisions signal a growing lack of consensus in how employment laws are interpreted and applied. Courts are increasingly vocal in their disagreements, not just with litigants, but with each other, creating ambiguity in areas that were once more predictable.

At the same time, key rulings have reshaped foundational legal principles. For example, courts are no longer required to defer to federal agency interpretations of ambiguous laws, which may lead to more cases proceeding to trial rather than being dismissed early. 

TAKEAWAY: For HR teams, this means heightened litigation risk and a stronger need for well-documented, consistently applied policies.

Shifting Federal Enforcement Priorities

Federal agencies are also adjusting their focus. Enforcement priorities have shifted toward religious discrimination and certain forms of national origin bias, while other areas, such as disparate impact claims, may receive less attention. For example, in the SCOTUS case Ames v. Ohio Department of Youth Services, the Supreme Court unanimously held that federal anti-discrimination law (Title VII of the Civil Rights Act of 1964) does not permit courts to impose a heightened burden of proof on employees from majority groups (such as being heterosexual, male, or white) when they bring discrimination claims.

Meanwhile, scrutiny of DEI initiatives continues to grow at the federal level, even as the underlying laws remain largely unchanged and DEI initiatives are not, generally, illegal. 

TAKEAWAY: HR leaders should be mindful of how programs are structured and communicated, ensuring they are compliant, clearly defined, and defensible.

States Are Filling the Gaps

As federal priorities shift, states and local jurisdictions are stepping in to expand protections. In Pennsylvania and beyond, HR professionals are seeing:

• Expanded anti-discrimination protections, including those related to hairstyles and religious head coverings (in Pennsylvania, the Pennsylvania CROWN Act went into effect in early 2026, prompting state employers to make significant changes to policies and practices)
• Additionally, minimum wage increases continue across many states (but, not yet in Pennsylvania), adding complexity for multi-state employers
• Enhanced paid leave and anti-retaliation ordinances at the local level
• Noncompete enforceability has gotten tougher overall, and is now limited in certain industries, such as healthcare

TAKEAWAY: Compliance is no longer one-size-fits-all. Employers must stay attuned to state and local developments that may have changed or differ from federal requirements.

AI in HR: Opportunity Meets Risk

Artificial intelligence is quickly becoming embedded in HR processes—from recruiting to performance management—but it introduces significant legal and ethical risks.

AI tools can unintentionally perpetuate bias, produce inaccurate outputs, or mishandle sensitive data. Perhaps more concerning, they may generate information that appears credible but is ultimately incorrect or unreliable.

TAKEAWAY: Organizations should implement clear AI usage policies, limit reliance on AI for high-stakes decisions, and require human oversight. Training HR teams on the limitations of these tools is equally critical to avoiding costly missteps.

Accommodation and Documentation: Back to Basics

Despite all the change, some core principles remain steady. Employers are still required to provide reasonable accommodations for disabilities, pregnancy, and religious beliefs, unless doing so creates an undue hardship.

What’s evolving is the level of scrutiny. Employers must engage in a meaningful interactive process, carefully evaluate each request, and document decisions thoroughly. Importantly, forcing an employee onto leave when another accommodation is possible may create legal exposure.

TAKEAWAY: Consistency, communication and contemporaneous documentation of events and circumstances are key. When in doubt, document and engage in dialogue rather than making assumptions.

Common Compliance Pitfalls & Opportunities

Many legal risks stem not from complex legal questions, but from everyday breakdowns in execution. Common issues include:

• Inconsistent application of policies across departments
• Poorly written or overly broad social media policies
• Lack of employee awareness around rights and reporting procedures
• Nonexistent or inadequate documentation of key facts and situations
• Delayed involvement of legal counsel

HR leaders can significantly reduce risk by fostering a culture of compliance—one that prioritizes training, transparency, and accountability.

To stay ahead in this environment, HR professionals should focus on a few critical actions:

• Conduct internal audits to identify high-risk areas
• Update handbooks and policies to reflect current laws and trends
• Train managers on emerging issues, including AI and accommodations
• Centralize key HR decisions to ensure consistency in decision making and documentation
• Engage employment counsel early when issues arise

Support for 2026 Employment Law & HR Compliance

In 2026, HR is not just a support function; it’s a frontline risk management role. By staying informed, proactive, and aligned with both legal developments and organizational goals, HR leaders can not only protect their organizations, but also create stronger, more resilient workplaces.

Our experienced Labor & Employment Law attorneys can help your organization comply with changing federal and state laws, and embracing new technology, while implementing best practices.

The post 2026 Employment Law & HR Compliance: What HR Leaders Need to Know Now appeared first on Fitzpatrick Lentz & Bubba, P.C..

Looking to sell your insurance agency? Or perhaps you’d like to expand your footprint by acquiring another one. When it comes to insurance industry M&A, much of the preparation is the same as any business, but there are nuances. Whether you’re a prospective buyer or seller, check out these tips from a seasoned M&A attorney. 

Seller Strategies for Insurance Industry M&A

When it comes to M&A success, timing is everything! What steps should insurance agency owners take one to three years in advance of a sale to maximize valuation and make their agency more attractive to buyers?

1. Diversify – while your insurance agency may specialize in personal or commercial lines, it’s prudent to showcase experience in multiple offerings. If it’s possible to expand or broaden your client base, seek to diversify, adding strength to your business. 
2. Build your team – often in an acquisition, a buyer will want to keep existing employees in place. Empower your team to step into leadership roles that relieve you of all those burdens and also allow them to bring value to new owners post-closing. Solid advice: build the business to run without you. 
3. Formalize your team – do you have signed employment contracts and employee handbooks? Non-competes are mostly a thing of the past, but a reasonable non-solicitation agreement will help preserve relationships and your business. 
4. Strengthen your processes – proactive policy renewals? Claims reporting? Compliance? Establishing and documenting your business processes will do you a world of good when it’s time to sell. While strong client relationships can take you far, buyers will pay a premium for turnkey operations.
5. Organize your books and financials – again, documentation is key when it comes to accounting. Maximize your asking price when you truly understand your EBITDA, beyond just the “value you bring.” Make it make sense with a data room that organizes important legal and financial documents a seller will need.
6. Get carriers on board – carrier agreement may include approval requirements like right of first refusal for sales. Look into these well in advance of a potential sale, perhaps even before valuation, to ensure you have a greenlight if desired. 

Buyer Strategies for Insurance Industry M&A

You know your industry. Have collegial relationships with another insurance agency with an owner set to retire. Made the handshake agreements. You’ve done the due diligence. Now it’s time to put pen to paper and get a Letter of Intent (LOI) together. What should you consider including in a LOI or purchase agreement?

• What’s being sold – is it just a book of business or an entire operation? Be clear on what you want to acquire. A book of business typically includes a client database and anticipated renewals, while an acquisition of an entire operation often encompasses brand reputation, a website, phone number and more. Buyers should also evaluate carrier agreements early in the process, as certain carrier consents or approvals are typically required as a condition to closing.
• Indemnification clause – while you may prize the relationship you’ve built with a seller, you also want to protect your acquisition from going sideways. What if there are unexpected tax issues post-closing? Or perhaps the book of business was misrepresented. All this and more can be covered by representations and warranties, along with indemnification provisions that allocate risk and establish who is responsible if issues arise after closing.
• Transition services and restrictive covenants – a successful insurance agency acquisition often depends on continuity. Buyers may want the seller to remain involved for a transition period to help retain client relationships, maintain carrier connections and ensure a smooth operational handoff. Buyers should also consider reasonable restrictive covenants, applicable both to the seller and key employees or producers who transition to the buyer’s organization, helping preserve client relationships and protect the value of the acquired business.
• Earnouts – earnouts are a popular technique to reduce your upfront payment requirements while incentivizing the seller to meet post-transition performance targets. They also make sense amidst uncertainty in the market or to help resolve valuation gaps. Be sure to leverage an M&A attorney to clearly construct this aspect of your agreement to avoid unclear provisions and any disputes. 

Most of these LOI elements are similar for an acquisition in any industry, however, a current trend impacting the insurance industry is the silver tsunami. With baby boomer insurance agency owners looking to retire en masse, many with no succession plans, insurance networks and private equity-backed “roll-ups” have seized the opportunity to aggressively buy and consolidate small agencies. This enables them to scale quickly, establishing a national name built on the strong reputations of local agencies. Perhaps you are one of these conglomerates or you’re an agency owner wanting to expand. When considering your buying strategy, it’s wise to know your buying competition. 

Support for your insurance industry M&A opportunities

Successful M&A happens with proper preparation, notably picking the right advisors. Just as there are similarities for a deal in any industry, there are certainly nuances to consider as well. Whether you’re a buyer or seller in the insurance industry, our M&A team is here for you. 

The post Insurance Industry M&A: What Buyers and Sellers Need to Know appeared first on Fitzpatrick Lentz & Bubba, P.C..

Pennsylvania realty transfer tax can arise in unexpected ways in merger, acquisition, and recapitalization transactions involving entities that own real estate. While realty transfer tax is most commonly associated with recorded deeds and direct conveyances of real property, Pennsylvania law also imposes realty transfer tax on certain transfers of ownership interests of entities treated as “real estate companies” even where no deed is recorded and title to the real estate itself does not formally change hands.

Understanding when an entity is treated as a “real estate company,” and how indirect transfers are analyzed under Pennsylvania’s “acquired company” rule, which recharacterizes certain equity transfers as taxable transfers of underlying real estate assets, is critical to avoiding unexpected tax liability in M&A and restructuring transactions.

What is a “Real Estate Company” Under Pennsylvania Realty Transfer Tax Law?

Under Pennsylvania law, an entity may be treated as a “real estate company” if it is “primarily engaged” in holding, selling, or leasing real estate and satisfies certain ownership and financial-based tests relating to its assets or gross receipts. Significantly, this concept can extend beyond entities that directly own real property to ultimate parent companies. Where applicable, the statute focuses not only on the nature of the entity’s assets, but also on how the business is operated and how value is derived.

For real estate holding companies, this analysis is straightforward. However, the analysis can become considerably more nuanced where an operating business owns substantial real estate assets or has engaged in real estate-related activities ancillary to its core operations. In those circumstances, the distinction between an operating company and a statutory “real estate company” is not always clear and requires careful evaluation under the applicable statutory and regulatory framework.

In practice, the determination is highly fact-specific and depends on a variety of considerations, including the nature of the entity’s business operations, the composition of its assets, the source of its revenues, and the extent to which its activities may be characterized as primarily related to the ownership, leasing, development, or disposition of real estate.

How the “Acquired Company” Rule Can Trigger Pennsylvania Realty Transfer Tax in M&A Transactions

Under Pennsylvania’s “acquired company” provisions, a transfer of 90% or more of the ownership interests in a qualifying “real estate company” within a three-year period may be treated as a taxable transfer of the entity’s underlying real estate assets. As a result, transactions structured at the entity level—including internal restructurings, equity recapitalizations, and private investment transactions—can create significant realty transfer tax exposure notwithstanding the absence of a direct conveyance of real property and without regard to any continuity of beneficial ownership.

Pennsylvania Court Guidance on Statutory Exclusions for Indirect Transfers

The Commonwealth Court of Pennsylvania recently held that the statutory exclusions from Pennsylvania’s realty transfer tax also apply to qualifying real estate company transactions even where the transfer is effected indirectly through changes in ownership interests rather than by deed. In doing so, the court rejected a more restrictive interpretation previously advanced by the Pennsylvania Department of Revenue and confirmed that the analysis must be grounded in the statute itself rather than administrative limitation.

The court’s decision makes clear that while Pennsylvania’s realty transfer tax regime can capture indirect equity transfers, statutory exclusions—including certain transfers to and from trusts for estate planning purposes, certain transfers between family members, certain transfers to shareholders, certain mergers qualifying for the statutory merger or consolidation exclusion, and certain transfers occurring pursuant to bankruptcy or insolvency proceedings—may still apply in the entity-transfer context and should be evaluated when structuring transactions.

Key Takeaways & Practical Implications for M&A Transactions in Pennsylvania

Because Pennsylvania’s “acquired company” rules apply to indirect transfers in a real estate company, the legal analysis must focus not only on the form of the transaction at closing, but also on how ownership is transferred throughout the broader transaction structure and relevant measurement period:

• Recapitalizations, staged investments, holding company formations, and other multi-step transactions therefore require careful review to determine whether, individually or collectively, they may result in a transfer of 90% or more of ownership interests within the applicable three-year window. As a result, parties may face tax liability economically similar to a direct transfer even where the transaction is documented entirely as an equity transaction.
• Realty transfer tax exposure can meaningfully affect both transaction structure and overall deal economics. This often requires early alignment among deal participants regarding how ownership interests will be transferred and over what timeframe, particularly in sponsor-led recapitalizations or investments involving new equity partners. Where ownership changes occur in stages, or where post-closing transfers are contemplated, the timing and sequencing of those changes may be just as important as the ultimate ownership outcome for purposes of the realty transfer tax analysis. 
• Documentation also plays a critical role. Governing agreements, side agreements, and economic understandings among the parties can all inform how a transaction is viewed for realty transfer tax purposes. Even where a structure appears to remain below statutory thresholds at closing, subsequent events or prearranged transfer mechanics may create exposure if they suggest that the ownership shift is part of a single integrated transaction.

Accordingly, realty transfer tax considerations are best addressed alongside other core deal issues at the outset of any acquisition, recapitalization, or restructuring involving Pennsylvania real estate holdings rather than as a post-structuring tax footnote. Early assessment of potential realty transfer tax exposure can help parties:

• avoid unexpected and unintended transfer tax liability,
• reduce unnecessary transaction costs and professional fees,
• minimize the need for costly post-closing restructuring or corrective planning, and
• improve the parties’ ability to negotiate and allocate tax risks as part of the broader deal economics.

If you are considering an acquisition, recapitalization, or restructuring involving Pennsylvania real estate holdings, our M&A team can help assess potential realty transfer tax exposure and related structuring considerations. Please contact us to discuss how these rules may apply to your anticipated transaction.

The post The “Acquired Company” Realty Transfer Tax Trap in M&A Deals appeared first on Fitzpatrick Lentz & Bubba, P.C..

Recent surveys show more than 50% of American adults are using AI. From a business perspective, companies looking to leverage this technology must do so strategically and with great care, as there are regulatory, intellectual property, privacy, and other legal challenges to consider, as well as industry-specific risks and challenges. Our attorneys can help you navigate this important and quickly evolving terrain with our understanding of artificial intelligence law.

How businesses are using AI

Some commons ways businesses are already using AI include:

• Contracts – AI can help improve efficiency when it comes to contract management, drawing from a library of templates and clauses, comparing previous versions, eliminating errors, and creating an audit trail to show changes; however, while AI can be a really useful starting point for contracts, it shouldn’t be your endpoint.
• Intellectual property – depending on what services or products you offer, AI may be baked into your innovation processes.
• Customer data and service – along with trends and data analysis, marketing departments often rely on AI to improve the customer experience, ensuring they are engaged at every touchpoint.
• Employment/HR – employers benefit from AI tools to help rank and score candidate resumes, as well as predict talent needs and growth opportunities; however, without proper implementation and maintenance, there is a risk that the use of these tools may result in an employer’s violation of federal and state anti-discrimination laws.
• Media – especially on social platforms, businesses may use AI for monitoring responses, generating social ads, and suggesting content based on user interaction and sentiments
• International Business – for companies looking to expand globally, AI can help reduce overhead costs especially from importing and exporting good and decreasing cybersecurity risks.

The benefits of AI are apparent. Businesses can utilize AI to streamline processes, reduce manpower, and inform business strategies. Several service-driven business sectors like marketing, IT, finance and healthcare are embracing AI to help enhance their capabilities. While some employees and workers in these sectors find AI threatening, more often than not, it presents an opportunity for humans to harness the power of AI in a collaborative manner.  Utilization of a tool as powerful as AI can raise several important legal questions, though.

Understanding Artificial Intelligence Law

If your business utilizes AI, you should also seek to understand its risks and legal implications. Some considerations include:

• Trust and accountability – when a human inside a corporation commits fraud or embezzlement, they are criminally charged for decisions they made and action they took; when an AI-powered system is responsible for similar activities, where does the liability fall?
• Governance – just as AI is still evolving, so are governance policies regarding how to monitor and control its activities; truly understanding the AI your company is adopting will help ensure your ability to govern it from development to deployment, especially as ISO standards for AI are still under development.
• Compliance – human interactions are at the root of AI training and algorithms can fail; businesses ought to regularly validate AI models through ongoing monitoring and analysis of outcomes to help ensure consumer protections remain in place.

Ethics is at the heart of each of these areas. As our society continues to learn about and embrace AI, there is concern about how the respect of human values is or is not embedded within the algorithms of a machine. Beyond that, how these ethics and values play out in the decisions and actions of AI systems is still being studied.

When it comes to artificial intelligence law, it’s important that businesses utilizing these technologies be able to demonstrate through documentation how they integrated AI into various business procedures, as well as maintain and follow policies that monitor use.

The Federal Trade Commission (FTC) continues to make programmatic advances to protect consumers when it comes to AI use. Businesses should be mindful of proposed and finalized FTC rules to maintain compliance.

Business legal support for AI use

AI is a helpful technology that can be successfully implemented by a company when properly harnessed by humans. With the growing adoption of artificial intelligence, there are also growing legal liabilities. At the end of the day, the onus is on those who create, install, and use the technology.

At FLB, we have been here growing alongside our clients for over 35 years. Our attorneys are here to help our clients using or considering AI ensure best practices and legal protections are in place.

While we embrace new technologies, we pride ourselves on practicing law with a human touch.

The post Does Artificial Intelligence Law Impact Your Business? appeared first on Fitzpatrick Lentz & Bubba, P.C..

Facing a legal issue? While it might be a gut reaction to plug your problem into your favorite AI platform for advice, STOP. A recent legal case created precedent when it comes to using AI for communicating with an attorney, i.e. attorney-client privilege. See how sharing key legal data with AI can impact attorney-client privilege. 

What is attorney-client privilege?

Attorney-client privilege is a legal protection that keeps communications between a client and their attorney confidential, preventing disclosure to third parties, including during discovery or in response to a subpoena. Its purpose is to encourage open and honest discussions so attorneys can provide effective legal advice. 

At its core, attorney‑client privilege is designed to foster open and honest communication between clients and their attorneys. This protection ensures that clients can share all relevant information, enabling attorneys to provide the best possible legal advice without concern that these discussions might later be revealed to an opposing party.

This privilege can be waived both by affirmatively waiving it or through the client’s actions.  Once privilege is waived, it may be lost permanently. Courts may not permit parties to reclaim privilege, even if the disclosure was accidental or resulted from a misunderstanding of technology.

AI can waive attorney-client privilege

AI users beware: AI is one such technology which can unknowingly waive attorney-client privilege. Why? Most public generative AI platforms do not provide a confidential environment. Information entered may be stored, reviewed, or utilized by the service provider according to its terms of service—effectively sharing it with a third party.

Sharing privileged information with a third party typically waives attorney‑client privilege. Courts analyze disclosure to AI platforms the same way they analyze disclosure to any non‑lawyer. The technology does not change the doctrine.

Generative AI is not a lawyer

Interactions with a public AI system—including those involving legal strategy or exposure—do not constitute communications with counsel and therefore are not protected by privilege.

In United States v. Heppner, a federal court in the Southern District of New York addressed, for the first time, whether documents generated through a public AI platform were protected by attorney‑client privilege or the work‑product doctrine. Here is a summary of the case:

• The defendant used a public generative AI tool (Claude) after becoming the target of a criminal investigation to analyze his legal exposure, outline defense strategies, and prepare legal arguments based on facts and law.
• The defendant subsequently provided the AI‑generated documents to his attorneys, and when they were sought by the other party they asserted that the documents were privileged since they had been created to seek legal advice.
• The court rejected that argument and ordered the documents produced to the government.

Analysis of this case infers that judges will “consider how privilege can operate to promote effective collaboration between clients and attorneys in this age of AI.” Courts will apply established privilege rules to new technologies—and recent case law demonstrates they will not hesitate to find waiver when confidentiality is compromised.

Using AI for legal issues: a how-NOT-to guide  

Similar to guidance given to attorneys on using AI for work product, clients need to be equally cautious. 

If you are facing a legal issue that requires legal counsel, here are three things to remember: 

1. Uploading attorney memos, strategy documents, or legal advice to a public AI platform risks waiver of privilege—even if the goal is merely to summarize, rewrite, or “pressure‑test” arguments. Do not upload correspondence, legal memoranda, draft pleadings, internal investigations, or attorney communications into consumer AI tools without explicit direction from your attorney.
2. A document does not become privileged simply because it is later sent to a lawyer.
3. Even copying language received from counsel into an AI prompt can waive privilege if it reveals legal advice or counsel’s analysis to a third party.

In short, approach public generative AI platforms as public forums, not private workspaces. And more importantly, consult counsel before using AI tools in connection with legal matters, particularly investigations, disputes, regulatory issues, or transactional strategy.

In this age of AI, please press pause on entrusting your legal concerns to Claude or any other AI platform. Connect with trusted counsel and let a licensed professional help you build a path forward. 

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For many private business owners, their ultimate “exit strategy” may involve the potential sale of their business to a third party. If you think that you may sell your business, then it is important that you begin to prepare for that possibility now. By making certain strategic decisions, you can make your company more attractive to potential buyers, ultimately helping you maximize the valuation of your company. If you wait until your company has “gone to market”, then you may have unknowingly limited your options and reduced the value that you might have otherwise realized on such a sale.

There are any number of steps that you, as a business owner, can take to help prepare your company for sale, including, but not limited to, the following:

Get a sense of what your business is actually worth

It is important that you have reasonable expectations as to what your business may actually be worth to a third-party buyer. Most businesses are valued based on some multiple of its earnings or EBITDA (Earnings before interest, tax, depreciation and amortization). In order to determine the value of your business, you should engage a reputable valuation expert.  Even if you are confident that you know the value of your business, having a third-party report can provide significant help in negotiations.

Going through an evaluation process also provides an opportunity for an objective assessment of the company, including identifying its strengths, weaknesses, opportunities, and threats. Once you have this information, it becomes easier to focus your resources on making improvements.

Make sure that your legal affairs/documents are in order

Ensure legal documentation is up to date and in compliance, for the following:

• internal organizational documents
• corporate books/records
• any permits, licenses, or other similar authorizations

Failure to comply with the required corporate formalities (including properly documenting Board and Shareholder approval of key transactions or maintaining necessary governmental approvals), could result in a decreased valuation.

If you have concerns about lack of recordkeeping, here are three steps to take to help get your business in order:

• Document your policies and procedures so that whoever takes over will immediately know how to run the business.
• Identify and eliminate any potential legal matters (vendor complaints, employee claims, etc.).
• Ensure that key contracts are assumable/transferable upon sale

Establish a solid management team

Build the business to run without you.

It is important to remember that a buyer will be purchasing a business, and that business needs to be able to continue to thrive once you are gone. Therefore, prospective buyers like to see a strong supporting management team. This indicates that the business has the necessary structure in place to continue to flourish post-acquisition. 

In addition to building a strong management team, you should consider investing in systems to track key metrics.

Organize your finances

Some common mistakes that many business owners make are maintaining sloppy books and mixing business and personal expenses. Accordingly, in advance of selling your business, you should make sure that your tax returns, financial statements, and other documents have been properly prepared and reviewed/audited by your accountant or other relevant professional advisors.  You also will want to find ways to increase profitability and create efficiencies as those will drive up the valuation.

It is crucial that you have strong financial statements and can readily present a clear and accurate picture of the financial health of your company to a prospective buyer.

This may require, for instance, maintaining a “normalized” balance sheet. For example, if you are paying too much (or too little) rent to an affiliated entity that can affect the overall financial picture that your financial statements might otherwise present to a prospective buyer. Monetize redundant or under-used assets, and focus on spending and expense control opportunities.

Evaluate your customer relationships/customer concentration.

All Buyers want to reduce their transactional risk. One way they like to do that is typically by targeting companies that have a broad customer base with little customer concentration, as that reduces the harm that the loss of certain customers will have to the overall revenue of the business. For example, if a business only has one (1) customer that would significantly suppress its enterprise value as the loss of that customer would effectively eliminate the revenue stream.

Buyers also like to acquire businesses that have some stable “re-occurring revenue”, because that further reduces the financial risks associated with the M&A transactions. For example, having signed service/maintenance contracts with customers and/or being on approved “bid lists” provides potential buyers with some assurances that those customers will be retained following the completion of the transaction.

Lock down key employees

Make sure that all key employees have signed employment agreements that contain non-compete agreements, non-disclosure provisions and, if applicable, assignment of invention provisions. Buyers will want to have some assurances that any key employees will not simply leave and join a competitor.

The attorneys at Fitzpatrick Lentz & Bubba have extensive experience advising clients on a wide variety of business matters, including mergers, acquisitions and other forms of business transactions.

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Does your business have an exit strategy? M&A preparation is needed to help you be successful in conversations with prospective buyers and to achieve your goals. If done right, selling your business can lead to long-term wealth for you and your family. Learn how to position your company well now and for the future.

M&A preparation tip #1: tell a story; sell a strategy

Now in its 17th season, ABC’s hit show Shark Tank presents a mix of aspiring and successful business owners seeking investment and counsel of several experienced financiers. With just a minute or two to pitch their ideas and entice the investors, contestants looking to make a deal must hone their stories and present sound business strategies to solicit offers. The same goes for those looking to sell their business. Here’s how:

• Tell a story – how did your business get started? Where did you go right? Wrong? Draw your buyers in with the details of your origin story and catch them up to this selling moment. While an M&A transaction is principally about financials, both parties involved are human – the ability to connect through a well-crafted narrative is a powerful M&A tool.
• Know your worth – part of your story must be the numbers. If the acronym EBITDA (earnings before interest, tax, depreciation and amortization) means nothing to you yet, make it part of your vocabulary with an expert business valuation. Having a sense of your worth, especially in context of today’s market, gives potential buyers a clear picture of the opportunity in front of them. What’s in it for them?
• Share a vision – having a long-term roadmap of your business displays your ability to strategize and paint a picture of the future. Showcase a deep understanding of your industry, as well current and future customers, to help prospective buyers see the potential for growth.

In short, M&A preparation means brushing up on your presentation skills and demonstrating why your business is ripe for a sale. The right mix of numbers and narrative invites buyers to the table and makes a sale palpable.

M&A preparation tip #2: get your house in order

Expect your prospective buyers to do their due diligence with a lookback period of at least three years. Be prepared to show key documents like:

• Financials – where’s the money? Organize profit & loss statements, asset values, balance sheets, and cash flow statements to show the financial health of your business.
• Accounting/tax/legal – business formation documents, employment/vendor/customer contracts, tax records, and any intellectual property like patents, trademarks, etc. should be made available and used to help assess value.
• Business – beyond where your company’s been, where is it going? Share marketing plans, competitive and industry analyses, R&D efforts, and other insight documents about your key stakeholders to let buyers know the people driving your business.
• Operations – how does your business run? Give buyers a look into your key team members, reporting structures, and physical spaces, being prepared to offer facility tours.

It’s important to review your records before turning them over to identify mistakes and inaccuracies. Be sure to disclose any document discrepancies or issues to your M&A attorneys and financial advisors and seek to fix and/or explain them before documents are turned over to prospective buyers. If there are skeletons in your closet, it’s time to get them out.

M&A preparation tip #3: maximize your purchase price

In a down market, interest rates are high and getting financing can be difficult. Sometimes sellers must get a little creative to make the sale but not sell themselves short. If you’re not seeing eye to eye with a buyer on valuation and upfront cash offers, consider an earnout. Earn-outs are paid out after your closing date based on future success of the company. Ask your M&A attorney if this may be appropriate for you and incentivizing for your buyer.

A taxation attorney may also help you with the allocation of the purchase price for your business. Always seek to maximize your purchase price by negotiating how your assets are being allocated, typically in one of four ways, each with its own tax rates and implications:

• Inventory
• Furniture, fixtures & equipment (FFE)
• Intangibles (including non-competes)
• Goodwill

As a seller, you’ll want to seek to allocate a large portion of your sale price as goodwill – often those intangible assets like company brand, reputation, customer lists, etc. – to reduce tax liabilities for you, while still meeting the buyer at their desired price point. Seller and buyer records should match when it comes to filing with the IRS to avoid audits, so be sure to broach this early and come to agreement.

M&A preparation tip #4: pick the right advisors

Selling your business is likely a complex opportunity. Having the right partners in place from a legal, accounting, tax, and financial planning perspective will help ensure your sale is successful and fitting for your current and future goals, as well as preserves your wealth.

Our experienced Mergers & Acquisitions team is here to help you with M&A preparation, navigating the intensity and intricacies of your transaction. The broad range of services offered by FLB contributes to our M&A team’s ability to work efficiently and cooperatively with our other practice areas, including real estate, estates, employment and taxation, to provide appropriate “one-stop shopping” for all of our clients’ M&A needs.

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