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Abstract:
In accounting for business transactions in the United States, it has long been the case that keeping two different sets of books (one for financial reporting and one for income tax reporting) is 'generally accepted.' A company can often effect a transaction that in economic substance begins at 'point A' and ends at 'point B,' but account for the path taken in one manner in its financial statements and in a markedly different manner in the company's income tax returns.

Three prominent examples of this accounting divergence that have become subject to public scrutiny are: 'synthetic leases' of real estate (where a company claims to 'own' financed property for income tax purposes, but to be a mere 'tenant' under an 'operating lease' for financial accounting purposes); 'off-balance sheet' partnerships (one of Enron's 'end runs' under which a company in effective control of a partnership may claim responsibility for all or part of the partnership's liabilities in its income tax reporting, but exclude such liabilities from its balance sheet for financial statement purposes); and accounting for the grant and exercise of compensatory 'nonqualified' employee stock options at a bargain price (whereby a tax deduction is recognized for the compensation represented by the bargain element of the transaction, but financial accounting under U.S. 'generally accepted accounting principles' ('GAAP') has failed to require that a charge be taken against the employer's income in its financial statements).

In each of those three cases, the company (or its management) may derive substantial benefits, in terms of both tax savings and better looking financial statements than would be the case if the book reporting of the transactions more closely corresponded with the associated tax reporting. Moreover, these 'take both roads' transactions are not recent innovations nor unique to Enron. Despite some significant criticism, they have been utilized for years by many well-known companies in transactions involving billions of dollars. Long before Enron's bankruptcy, the existence of synthetic leases, with blatantly inconsistent book and tax accounting treatment, implied inadequate interaction among the institutions charged with shaping and regulating tax and accounting rules.

The Enron bankruptcy and revelations of questionable accounting practices by other major companies have placed these divergent accounting transactions on the public radar, raising two pivotal questions. First, why were such large 'blips' allowed to fly below the radar for so many years? Second, how can the administration of the tax and securities laws be improved to bring to these divergent accounting transactions the degree of 'transparency' the markets are demanding, and regulators and other interested observers are professing to seek, in the aftermath of Enron?

This article explores examples of transactions with dramatic financial statement/income tax reporting divergence and summarizes the history of the book-tax accounting conformity debate in the United States, describing the political environment and institutional decisions that have allowed substantial divergence to exist. It also suggests ways for the appropriate regulatory bodies to more regularly employ book-tax comparisons to identify improper accounting practices and to cause the implementation of rules and standards which require consistency in targeted situations with common goals of tax and financial reporting.

synthetic leases of real estate, off-balance sheet partnerships, non-qualified employee stock options, Generally accepted accounting principles, GAAP, Enron, WorldCom, Sarbanes-Oxley Act of 2002, American Institute of Certified Public Accountants, AICPA, Financial Accounting Standards Board, FASB

Abstract:
This Report is the result of a grant to the University of Missouri-Kansas City from the Ewing Marion Kauffman Foundation to research and describe current methods of training law students and lawyers destined to represent entrepreneurs, and to identify promising pedagogy in pursuit of the goal of educating effective counselors to entrepreneurial clients. Entrepreneurs clearly need help in dealing with a multitude of increasingly complex laws and regulations. They may also require counsel in obtaining financing and negotiating their transactions, within the bounds of the applicable rules, to achieve their goals. The research reflected in this Report indicates that there are many accomplished educators dedicated to training their students to be effective, problem-solving legal counselors to entrepreneurs, and many examples of outstanding pedagogy in that pursuit. Moreover, the Report suggests that recent trends in legal education should facilitate further refinement and expansion of law and entrepreneurship programs, with particular focus on honing practical skills through experiential learning. The increasing emphasis on "apprenticeship" approaches will better enable law students to effectively and productively apply the substantive laws they have studied and the analytical skills they have developed in the classroom as they set out to work in teams with business clients and their other advisors. At the same time, there are certainly some impediments to widespread establishment of some of the more promising opportunities to prepare law students and lawyers to be exceptionally valuable counselors to entrepreneurs. In particular, there is much work to be done to overcome obstacles to the implementation of significant interdisciplinary initiatives. This Report addresses such challenges and includes recommendations for promoting throughout legal education in the United States more widespread use and expansion of the innovative teaching described in the Report and its appendices that is presently blossoming at several U.S. law schools.

Entrepreneur, Entrepreneurial, Entrepreneurship, Counsel, Counselor, Lawyer, Attorney, Law School, Legal Education, Continuing Legal Education, CLE, Business School, Clinic, Clinical, Interdisciplinary, Small business, Venture, Finance, Financing

Abstract:
Business clients often view lawyers as obstructionists who do little more than tell them they cannot do what they want to do. These perceptions are particularly prevalent among creative, energetic entrepreneurs who have crafted an innovative product or service to satisfy a market need and are anxious to commercialize their inventions. The most effective business lawyers understand that they must do more than report impediments. They recognize the need to consider the client's underlying goals and business plans and, when they identify a legal obstacle, to be prepared to suggest and explore reasonable alternatives that can be accomplished in compliance with the law. This article reports on developments in the education of business-oriented law students that have occurred in recent years at several U.S. law schools, explores law school-business school collaborations in particular, and offers suggestions that might be of value to others seeking to use interdisciplinary initiatives to augment the training of students desirous of becoming effective business lawyers. It identifies obstacles to law school involvement in interdisciplinary collaboration and discusses course offerings at schools that have overcome these obstacles in implementing innovative programs in both regular classroom and clinical curricula. Finally, the article presents a case study of efforts to develop a comprehensive Entrepreneurial Lawyering Program at the University of Missouri-Kansas City School of Law, with special focus on a law school-business school collaborative course in Entrepreneurship & New Venture Creation which involves team teaching to law students, MBA students and engineering students. The article concludes that the benefits to faculty and students of this type of collaboration far outweigh the costs of addressing the associated challenges.

Entrepreneurial lawyers, Law school, Business school, Collaboration, Business-oriented lawyer, Interdisciplinary, Entrepreneurship, Venture Creation, MBA, Law student

Abstract:
Students studying business planning in an American law school should be told up front that a twenty-first century transactional lawyer rarely encounters a truly simple business transaction. Legal educators acknowledge the need to emphasize the complex, multidisciplinary nature of advising modern business clients. Law students must be introduced to the reality that transactional attorneys routinely collaborate with accountants, engineers, and other types of specialists and consultants to properly identify issues and address their clients' needs. Businesses - particularly firms comprised of entrepreneurs on tight budgets in terms of both time and money - benefit greatly when relevant information is accurately and efficiently communicated to the requisite team of advisors, and primary responsibility for each pertinent issue is assigned to the most qualified team member. The value of services delivered to business clients is further enhanced if all team members have a meaningful understanding of at least the basic elements of the issues being handled, as well as the vocabulary and problem-solving techniques employed by each trade or profession involved.

A uniquely effective approach to providing high quality service might take the form of an interdisciplinary business planning firm, owned and controlled by a group of knowledgeable parties that are willing to share risks and rewards, abide by ethical rules designed to protect the public, learn from each other, and deliver coordinated advice to firm clients. Law students - educated on both the importance of collaborative efforts among service providers and the long-recognized advantages of pooling resources and sharing profits in a business organization - might, therefore, be surprised to learn that the formation of such a fully integrated, multidisciplinary partnership (MDP) violates rules governing the conduct of attorneys in virtually every state. The existing rules require service providers to pursue more cumbersome (and less entrepreneurial) mechanisms for the delivery of interdisciplinary services. These rules also encourage lawyers in nonlegal professional services firms to claim that they are not providing legal services in order to avoid what has been called the regulatory tent under which lawyers ordinarily practice.

Proposals to remove existing obstacles to the formation and maintenance of fully integrated MDPs have been the subject of heated debate in the legal profession and legal academia for approximately the last six years. Attention to the MDP issues has been fueled to some extent by developments in other countries that have accepted at least some forms of multidisciplinary practice, or are studying proposals to do so. Approximately four years ago the American Bar Association's (ABA) House of Delegates summarily rejected the recommendations of the ABA's Commission on Multidisciplinary Practice (MDP Commission), which would have facilitated the formation and regulation of at least some forms of fully integrated MDPs in the United States. Despite the ABA's adoption of Resolution 10F in July 2000, many states have continued to consider modification of their rules to permit these firms. Thus far none have implemented such modifications. Over the last few years, the ABA, the courts, and the bar associations of many states have also been revisiting existing definitions of the practice of law, as those definitions are used in rules prohibiting the unauthorized practice of law (UPL). At the same time, UPL issues have been involved in several areas, including studies of possible reform of rules governing multi-jurisdictional practice (MJP) by lawyers licensed in one or more jurisdictions who seek to work on matters in jurisdictions in which they are not licensed; law firms' provision of ancillary, that is nonlegal services; and the regulation of legal software or e-commerce. One commonly expressed goal of these projects is to provide more affordable, readily accessible professional services to underserved segments of the public.

This Article will focus primarily on one such constituency - entrepreneurs endeavoring to start, sustain, or grow businesses. Representing a large segment of the United States economy, entrepreneurs, especially those involved in small firm businesses, have a distinct need for the coordinated delivery of legal counsel and other services. Unfortunately, there is reason to believe that many entrepreneurs are failing to get adequate advice on legal matters. At the same time, many others are customarily using an inordinate amount of their resources to pay the separate fees of lawyers and other professionals who are failing to achieve the communication and other efficiencies that might result if they were members of a single firm. This Article posits that fully integrated MDPs among lawyers, accountants and other nonlawyers (such as, for example, financial planners, engineers, business consultants, and insurance specialists), with a business planning and transaction implementation focus, would not only provide high quality, cost-effective services to their clients, but also help ensure that all of the service providers follow ethical rules designed to protect the public. In support of that conclusion, the analysis herein expands on arguments derived from the rich body of literature surrounding the MDP Commission's work and subsequent MDP debate, and draws on more recent lessons from ill-fated UPL initiatives as they relate to competence in the delivery of interdisciplinary services. The discussion below also emphasizes several practical aspects of transactional work and the sharing of risks and rewards in a business organization to demonstrate the feasibility of a regulatory structure under which participants in a fully integrated business planning MDP would have incentives to abide by appropriate standards of conduct in the delivery of services to their clients.

To provide context for these propositions, Part I summarizes the principal policy arguments that have characterized the MDP debate, including a description of conflicting views as to the extent to which MDPs might erode core values of the legal profession. Part II describes a hypothetical business formation scenario, as an example of a common situation in which the services of a business planning firm owned and operated by qualified lawyers and nonlawyers might be tremendously valuable. Part III then examines existing obstacles to the operation of such a firm, taking into account recent efforts to better define the practice of law, and addressing attorney conduct rules that continue to preclude the formation of fully integrated MDPs. That examination reveals that in business planning and transactional work, where the lines between legal and nonlegal work are often quite blurry, there are no compelling reasons to retain a system that grants to firms owned or controlled exclusively by lawyers a monopoly on the delivery of the arguably legal services involved. Finally, Part IV suggests specific elements of a regulatory framework that are designed to permit fully integrated business planning MDPs to operate in a manner - adaptable to other types of multidisciplinary firms as well - that would elevate substance over form to both serve clients more efficiently and preserve core values of the legal profession that are in the public interest.

multidisciplinary practice, multidisciplinary partnership, MDP, American Bar Association, ABA, ethical rules, nonlawyers, Model Rules of Professional Conduct, MRPC, practice of law, entrepreneurs, MDP Business Planning, business planning, business clients, interdisciplinary business planning, MDP Co