Business Opportunities in Arizona : Legal Aspects & Labour Force Mobility in Arizona

1. Business Opportunities in Arizona:Legal Aspects &Labour Force Mobility in Arizona Julie Lessard, L.L.B., Partner, BCF LLP « Business Opportunities in Defense, Aerospace, and Information and Communications Technologies Sectors in Arizona », Board of Trade of Metropolitan Montréal, World Trade Centre Montréal, May 20, 2009

2. Disclaimer: This document is based on the information current as of May 20, 2009 and the information contained herein is subject to change without notice. The information provided in this presentation is of a general nature and may not apply to any particular set of facts or under all circumstances. It should not be construed as legal advice. This presentation is solely intended for the use of the attendees and any reproduction thereof is prohibited without prior express consent from BCF LLP.

3. U.S. Legal Environment • “Common law” system originating in England (exception: Louisiana Code); • Emphasis on freedom of commercial parties to make agreements; • Uniform Commercial Code and states’ interpretations of UCC; • Litigiousness; • Arbitration as cross-border dispute resolution alternative;

4. Establishing a Business • Sole Proprietorships • Partnerships • Corporations • Limited Liability Companies • Branches • Joint Ventures • Acquisitions & Mergers

5. Business Filings in Arizona • Arizona Business Profit Corporation • S-Corporation • Foreign Business Profit Corporation • LP, LLC, LLP, and foreign LP, LLC, LLP

6. Managing Legal Risks: Compliance Issues • GAAP/Sarbanes-Oxley • Labor Law and Unions • Sources of Financing / Credit Unions • Import and Export Controls • Foreign Exchange Control

7. Creating Legal Leverage • Patents and Trademarks • Tax planning

8. Tax Implications of U.S. Expansion STAGE I: MINIMAL PRESENCE (TRADE PARTNER STAGE II: INCREASED PRESENCE (BRANCH, OFFICE) STAGE III: FORMAL PRESENCE (PERMANENT ESTABLISHMENT) (U.S. Corporation)

9. Federal Taxation under U.S.-Canada Income Tax • Permanent Establishment (PE) as basis for taxation: • Criteria: • Assets: • A place of management • A branch • An office • A factory • A workshop • A mine, an oil or gas well, a quarry • A construction site if more than 12 mo in existence • Agency: • A « warm body » (limitation: purchasing goods or merchandise for Can Co.)

10. NEXUS : Base for State Taxation of Canadian Businesses • States not party to US-Canada Tax Treaty ; • Sufficient nexus (connection) possible even without PE by: • Storing inventory in a state • Renting office or warehouse space • Providing installation or implementation services • Performance of warranty or repair services, even by a third party • Delivering or picking up property in company-owned trucks • Selling at tradeshows • Soliciting business in a state (mostly Franchise tax and Sales and Use Tax)

11. Starting Business Corporation at a Glance • Register the business name and file the Articles of Incorporation • Apply for FEIN • Register online for Sales Tax • Register an Employer with the UID of the State DOL • Arrange for workers compensation through a private insurance fund • Arrange for publication as required by the Corporation Commission

12. Workforce Mobility: U.S. Options for Canadians • B-1 Business Visitor under NAFTA • TN (Trade NAFTA) Professional • E Treaty Trader / Treaty Investor • L-1 Intra-company Transfer

13. B-1 Business Visitor & B-1 under NAFTA • Nonimmigrant Intent • Permissible activities (meetings, discussions, negotiations) • Productive employment prohibited • Expanded list of activities under NAFTA: • Research and design • Marketing & sales • Distribution • After sales services

14. Trade NAFTA (TN) Work Permit for Canadians • Canadian citizenship • Member of listed professions (Appendix 1603D) • Bachelor’s or Licenciatura degree – NO Equivalency • For certain professions, other credenials appropriate (Management Consultant, Scientific Technician, Computer Systems Analyst) • Temporary professional services for U.S. company (or pre-arranged agreement between Canadian and U.S. entity) in a position listed in Appendix 1603D • Self-Employment Prohibited • Nonimmigrant Intent

15. Appendix 1603D to Annex 1603 of Trade NAFTA Lawyer Librarian Management Consultant Mathematician Medical Technologist/Medical Lab Technologist Meteorologist Nurse, Registered Nutritionist Occupational Therapist Oceanographer Pharmacist Pharmacologist Physician (teaching and/or research only) Physicist Physio / Physical Therapist Plant Breeder  Plant Pathologist  Poultry Scientist Psychologist Range Manager/Range Conservationist Recreational Therapist Research Assistant (in a post-secondary education institution) Social Worker Soil Scientist Statistician Sylviculturist / Forestry Specialist Teacher (coming to work for college, seminary or university). Technician or Technologist, Scientific. Urban Planner Veterinarian Vocational Counselor Writer, Technical Publications Zoologist • Accountant • Actuary • Agriculturist/Agronomist • Animal breeder • Animal Scientist • Apiculturist • Architect • Astronomer • Biochemist • Biologist • Chemist • Computer systems analyst • Dairy Scientist • Dentist • Dietician • Disaster Relief Insurance Claims Adjuster • Economist • Engineer • Entomologist • Epidemiologist • Forester • Geneticist • Geochemist • Geographer • Geologist • Geophysicist • Graphic Designer • Horticulturist • Hotel Manager • Industrial Designer • Interior Designer • Land Surveyor • Landscaping Architect

16. E Treaty Investor • The Nationality of the Company Requirement • Concept of “investment” or “in the process of investing ” • Possession and Control of Funds • Investment “at risk” • Funds irrevocably committed • Real and Active Commercial Enterprise • Substantiality and Marginality

17. E-2 Treaty Trader • Trade as Exchange of Goods or Services • Trade must be International • Trade must be in Existence • Substantiality of Trade • 50% of total volume between US and treaty country (Canada) • Measurement of Trade – • Branch “part and parcel” of Can Co.

18. L-1 Intracompany Transferees • Multinational Executive or Manager OR Specialized-Knowledge Employee; • One (1) year of employment abroad the U.S. for parent, branch, subsidiary or affiliate of the prospective U.S. Employer in managerial/executive or specialized-knowledge capacity prior to petition; • Must come to the United States to perform in managerial/executive or specialized knowledge capacity; • Entities in U.S. and abroad must conduct business on regular and continuous basis for at least one (1) year prior to petition; • EXCEPTION: NEW OFFICE SITUATION – INITIAL PETITION VALIDITY LIMITED TO 1 YEAR

19. Federal Labour and Immigration Law and Compliance Issues • The Immigration and Nationality Act (INA), as amended • Immigration Reform and Control Act (IRCA) of 1986 • Fair Labor Standards Act • Fair Employment Laws • Wage and Hour Laws and Regulations • Federal Unemployment Tax Act (FUTA) • Americans with Disabilities Act (ADA) • Federal Insurance Contributions Act (FICA) • Occupational Safety and Health Administration (OSHA) regulations

20. : What’s in a Name? • The Immigration Reform and Control Act of 1986 (IRCA) - “Basic Pilot Program” • Title IV, Subtitle A, of the Illegal Immigration Reform and Immigration Responsibility Act of 1996 (IIRIRA), Pub. L. 104-208, 110 Stat. 3009, as amended. (“E-Verify”) • The effective date of the final rule requiring certain federal contractors and subcontractors to use E-Verify has been delayed until June 30, 2009. 

21. FACTS • 66,000+ employers, representing close to 259,000 worksites, currently are signed up to use the E-Verify program; • 444 million records in the SSA database, and more than 60 million records in DHS immigration databases. • $11,000 possible penalty for non-compliance in fines (or more) and/or criminal action against employers; • $400 million per year in DHS budget for program expansion;

22. State Intervention in Labour & Immigration Compliance • Legal Arizona Workers Act, HB 2779 2007 PROVISIONS: Imposition of a business license penalty against any employer who knowingly or intentionally hires unauthorized employees after January 1, 2008 PENALTIES: • Suspension of business license (1st time offender) • Permanent Revocation of business license (repeat offender)

23. State Intervention in Labour & Immigration Compliance Legal Arizona Workers Act, HB 2779 2007 PROVISIONS: The Act requires all employers in Arizona, regardless of size, to verify the legal status of every new employee hired, through the E-verify program administered by the USDHS. Effective September 30, 2008, prohibition for government entities from awarding a contract to any contractor or subcontractor that fails to use E-Verify; LEGISLATIVE CHALLENGES: Latest legislative updates (March 09, 2009): The Ninth Circuit continued to rule that HB 2779 is constitutional and Denied the plaintiff’s petition for rehearing.

24. Conclusion / Contact Information BCF LLP 1100 René-Levesque Blvd. West 25th Floor Montréal (Québec) H3B 5C9 Telephone: (514) 397-8500 Fax: (514) 397-2260