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• June 2013 •

A Business & Finance Supplement New Israeli Hotels From the Editor The New Money Target Business Travelers Policy For Olim And Upscale Tourists By Steve K. Walz


way from the prying eyes of the Israeli and American Jewish mass media, lawyers, accountants, aliyah experts and a small cadre of Knesset members are dealing with a growing number of critical issues regarding veteran and future new immigrants (olim). The timing of these on-again, off-again meetings comes at the very moment when a substantial number of North American immigrants are on the verge of heading back to America and Canada for the forthcoming summer vacation period, while others are preparing to actually board aliyah flights from JFK and other points across the U.S. and Canada to the Holy Land. Once upon a time, the Israeli government was willing to roll out the red carpet for North American immigrants. The government offered a list of various incentives to new immigrants that made it a bit easier for them to abandon high-paying jobs and the relative good life, in order to live out the dream of returning to Zion. However, something is beginning to go awry. A few weeks ago, Haaretz revealed that there were elements within the Israeli government who wanted to remove a substantial portion of the incentives granted to new immigrants from North America and beyond. Some of those incentives include purchase tax breaks on consumer goods, and income tax breaks during the initial stages of aliyah. It’s no secret that it takes a few years for new immigrants to adjust to the new realities – language, culture, bureaucracy, job market, tax system etc. We’ve all read how the new Israeli government is crying poverty, even as Israeli newspapers keep on revealing that a sizeable number of the nation’s largest international corporations owe the Jewish State billions of shekels in back taxes based on “trapped profits” – a complicated financial anomaly created by past Israeli governments. (Continued on page 3)

By Steve K. Walz


t the recent Jerusalem Tourism Conference, Israeli Prime Minister Benjamin Netanyahu and Jerusalem Mayor Nir Barkat said that they won’t be satisfied until Israel boosts the number of foreign tourists, within a short peri-

od of time, from the current three million a year to more than 10 million. Israel’s current hotel infrastructure can barely provide enough 3-, 4- and 5-star rooms to accommodate the millions of visitors expected this year. In particular, Tel Aviv and Jerusalem suffer from a shortage of hotel rooms. However, there are a

The Lagoon complex in Netanya

growing number of new hotels that are in various stages of development in Tel Aviv, Jerusalem and Netanya. Tel Aviv, Israel’s bustling commercial and cultural hub, has experienced growth in the number of small, chic boutique hotels that have opened in the last few years. But in order to accommo-

date the spurt in the sheer numbers of upscale businesses and global travelers who wish to mix business and pleasure on a grand scale, Israeli hoteliers are building impressive facilities that are designed to rival some of the best hotels in the Middle East. (Continued on Page 3)



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Manhattan HS For Girls Introduced To Life’s Financial Realities By Barry Katz


ne of the most exasperating experiences for a high school teacher is explaining to the students the relevance that the subject matter has in “real life.” One math instructor spieled about going to a store, buying items, and not knowing the proper change. “Not a problem for me,” one girl remarked, “I’d just charge it to my credit card!” It is precisely this mentality that had Estee Friedman, general studies principal of Manhattan High School for Girls, implement the course, “Personal Finance & Philanthropy,” for 11th graders. Friedman says that the junior year of high school was ideal for the weekly class. “By 11th grade, they already know math and political science, and at that point they’re really making the divide between children and adults,” she said. With the encouragement of the New York State Association of Independent Schools – which oversees the school’s curriculum – and the blessings of the school’s board members, Friedman brought Tamar Snyder aboard to teach the course, which created a buzz among parents and students alike.

Snyder, a journalism major, graduated with the goal of writing about personal finance in a way that is easy for the average reader to understand. She had been working with Jewish Women International (JWI), an organization dedicated to empowering women and girls through various types of education. A few years ago JWI received a grant to create a program called “Life$avings,” a four-hour course on financial literacy for young women. The course introduced concepts such as check writing, credit card payments, and charity. Life$avings was presented to schools and synagogues in the tri-state area, including Manhattan High School for Girls. Shortly thereafter, Friedman approached Snyder about teaching a yearlong course on the subject. During the first class, Snyder recalled, she gave a pre-test to determine how much students knew about personal finance. She discovered that most of the girls knew very little, which is understandable considering that “parents are uncomfortable discussing their finances with their children.” While parents need not disclose their salaries, Snyder advised that they

should let their children know about tradeoffs they make daily. Aside from the classes “Needs vs. Wants,” “Credit Scores,” and “Insurance 101,” the students get to hear from guest speakers on topics such as “Making It as a Successful Frum Female Entrepreneur/Professional.” Thanks to the popularity of the class, Friedman said that other schools have contacted her looking to implement the same course into their curricula. Snyder added that the course has given the students a greater appreciation of how much their parents spend on items like food, clothes, tuition, and camp. This is especially true when they do their end-of-term project – in lieu of formal tests – whereby students must choose what careers they would like to pursue, where they would like to live, and to see whether their salaries are realistic. They are expected to put aside money for retirement and life insurance, and to be prepared for an unexpected occurrence (a “curveball,” as Snyder puts it) that life tends to throw at most people. The course is meant to help students in many facets of their profes-

A Personal Finance bulletin board in a classroom in Manhattan High School for Girls

sional lives, from learning about income taxes to conducting mock interviews and negotiations. And the course is not just for young women. It is being offered in other yeshivas as well, including Yeshivas Ohr Reuven in Wesley Hills, New York, which introduced the class this year. One parent who asked that her name not be used said that she was “thrilled that [her son] was able to take the course.” She said that trigonometry, which is what her son would have taken, is useless to 90 percent of the population – and was of little interest to her son. Yet, he is energized about the class’s stock project, in which students are given a hypothetical $5,000 to invest in the market, and each week they track their progress to see who is making the greatest profit. For students at Manhattan High School for Girls, the course is not an elective. It is mandatory so all students will come out knowing the information that has often eluded adolescents. And because personal finance is something that everyone has to deal with, the course benefits all – except perhaps for the purveyors of $6 cappuccinos!

EDITORIAL June 2013

New Money Policy (Continued from page 1) In addition, Israel’s 500 wealthiest people increased their collective wealth by NIS 10 billion (over $2.5 billion) during the past year, mostly by making sure that their businesses had little or no competition. Israel is not Greece, but the DNA for financial disaster was implanted into the system. As a result, powerful politicians and bureaucrats, who are allied with big business and wish to cover-up the mess they’ve created, have decided to dump an additional tax burden upon the Israeli middle class. Mind you, many veteran North American olim comprise part of the Israeli middle, working class. Americans might complain about paying $4 a gallon for gas but what happens when Israelis who earn shekels (with an average salary around $500 a week) are asked to fork over $8 a gallon, with more than half-the price being comprised of various taxes?

During the past few years, the Israeli government has also worked closely with the U.S. administration to create what many accountants and lawyers are calling draconian tax laws in order to hunt down potential money launderers, people who wish to hide assets etc. The laws have become so controversial and the annual reporting so overbearing that Israelibased American CPA’s are quietly trying to bring together American and Israeli tax officials in order to try and simplify matters without causing chaos. Newly-elected, American-born Knesset member, Rabbi Dov Lipman is also working closely with the aliyah organization Nefesh B’ Nefesh to try and maintain the government’s aliyah incentive packages, so that the impressive flow of new immigrants who are arriving from North America isn’t impeded in any way.

It’s a well-known fact that the tens of thousands of North American olim who have made aliyah during the past decade have pumped hundreds of millions of shekels (if not billions) into the Israeli economy and have paid their taxes religiously. Can shortsighted Israeli politicians afford to toss away the substantial sums new immigrants are pumping into the Israeli economy year-round by reducing their incentives to come to the Holy Land to begin with? That’s just bad business. As a service to the readers of the Jewish Press, some of whom are considering aliyah and others who own property in Israel, JP BIZ is offering exclusive advice on how to deal with the changing tax laws etc., penned by two experts, who are dealing with these issues on a daily basis on both sides of the ocean (See page 4).

New Israeli Hotels

(Continued from page 1)

In early June the Isrotel chain debuted its spectacular 5-star Royal Beach Tel Aviv Hotel, located directly across from the city’s beautiful beachfront promenade. “The Isrotel Royal Beach Tel Aviv is completely different from the hotels we know today in Tel Aviv,” said Lior Raviv, CEO of Isrotel. “The hotel has been designed by the German interior designer Harald Klein, who is renowned for designing some of the best hotels in Europe. The exterior and interior of the Royal Beach Tel Aviv reflect unique and modern designs.” The Royal Beach Tel Aviv has been integrated into Isrotel’s “Exclusive Collection” of 5-star luxury-class hotels, which includes the renowned Royal Beach Eilat, Beresheet, Carmel Forest and Cramim spa resort hotels. The 230-room Royal Beach Tel Aviv will provide guests with easy access to the city’s leading cultural and culinary attractions, which are within walking distance of the hotel. According to Raviv, the Royal Beach Tel Aviv is destined to attract a cadre of foreign business executives, Jewish organizational groups and upscale tourists from the U.S., UK, EU and Russia. “While guests will undoubtedly look to explore the sights and sounds of Tel Aviv, we are offering our own attractions and amenities, including an elaborate spa based on our successful model at the Carmel Forest Hotel, a gorgeous swimming pool that will overlook the beach, a two-level business lounge on the 18th and 19th floors that will offer a variety of services, a trendy bar where our guests can enjoy a cocktail with friends and business associates, conference rooms, and a first-class chef’s kosher meat restaurant overlooking the beach that I believe will be amongst the finest dining experiences in Tel Aviv,” Raviv said.

In addition, Isrotel is on the verge of erecting another 5-star facility in Jerusalem’s trendy German Colony that will also highlight an array of premium services for tourists. Israeli real estate and hotel developer Henry Taic, whose family has owned several valuable parcels of land along Tel Aviv’s beachfront promenade, changed the image of the city’s hotel industry when he built and opened the luxury David InterContinental Hotel. Now Taic is building a spectacular hotel and residential complex called David’s Promenade that will include Israel’s first Kempinski Hotel, scheduled to open within the next few years. Tel Aviv’s version of the high-end Kempinski brand, which is well known throughout Europe, Asia and the Middle East, will highlight 220 rooms within a spectacular glass tower facing the Mediterranean. According to hotel industry sources, Taic is also negotiating to build a second Waldorf Astoria Hotel next to the Hilton Corporation’s renowned Hilton Tel Aviv Hotel. The Hilton Corporation also manages the Waldorf Astoria brand. The first Waldorf Astoria Hotel in Israel, directly across the street from the Mamilla Promenade and the entrance to the Old City, is expected to host its first guests later this summer. IHG Hotels, the global hotels group that manages the InterContinental brand for Taic in Israel, was so pleased with the InterContinental’s success that they opened a unique second upscale brand in nearby Ramat Gan’s Diamond District. Last year IHG opened Hotel Indigo, a 90room boutique business hotel. According to IHG, “Each Hotel Indigo property is unique and designed to reflect the local culture, featuring locally-inspired murals and a renewal program where the images, music, scent, and menu items change throughout the year.”

Royal Beach Tel Aviv Hotel Lounge


A Business & Finance Supplement



A Business & Finance Supplement

New Israeli Hotels Gearing Up By Steve K. Walz..........................Page Pa 1 Pa Israel’s Tax Policy For New Olim By Steve K. Walz..........................Page Page 1 Girls’ H.S. Teaches Students Financial Lessons For Life By Barry Katz..............................Page Page 2 Page Handling Israel Taxes By Steven Ettinger and Jeff Broide....................................Page Page 4 The A, B, C’s Of New Business Ventures By Jeffrey Folger..........................Page Page 5 JP BIZ Insider..............................Page g 6 Israelis Buying Into the American Dream By Aaron Harow...........................Page Page 7

Letters to the Editor JP BIZ welcomes readers to submit letters to the editor. Letters will be selected for publication at the sole discrection of the editor, and may be edited for size and content. Submissions become the property of The Jewish Press. Please e-mail your letters to All material in this newspaper has been copyrighted and is the exclusive property of THE JEWISH PRESS Inc. and cannot be reproduced without due consent of the publisher.

In Netanya, just a short ride up the pristine Mediterranean coastline from Tel Aviv, the Dizengoff Trading Company 1952 Ltd. is currently engaged in building the most ambitious hotel and residential complex in the history of Israel. Located in the South Beach section of the city, Lagoon is being designed to attract a wide array of upscale couples, families, investors and vacationers from the U.S., UK, France and Russia. Lagoon, upon completion in late 2015, will feature two very different premium hotels. According to Hanan Segal, Lagoon’s vice president of marketing, “There will be a very exclusive hotel boasting 270 rooms that will feature all of the pampering amenities, which are found in the best hotels around the world. And we are negotiating with several well-known companies to manage hotel operations. “In addition,” Segal added, “there will be a high-end 220-room condominium [i.e. all-suites] hotel. The entire upscale beachfront hotel and residential complex lifestyle that Lagoon will be offering was a concept we brought from South Florida, which has been very successful.” During the past few years, Netanya Mayor Miriam Feierberg-Ikar has openly boasted that she intends to turn Netanya’s beachfront into “Israel’s Miami Beach.”



A Business & Finance Supplement


Even After You Leave The U.S., The IRS Isn’t Far Behind By Steven Ettinger


oth olim and longtime Israeli residents who are U.S. citizens are still subject to the full range of taxpaying and financial information reporting requirements administered by the IRS. The information reporting requirements relating to foreign financial accounts has taken on a life of its own in the realm of IRS enforcement and touches many of our (the Manhattan financial consulting firm of Billet, Feit and Preis, PC) clients. We hope to deal with this topic in a future column. More fundamental is understanding some of the potential tax traps that arise when someone is caught inbetween these two tax systems. It should be noted that we are not an Israeli firm and are not expert in Israeli tax law. The issues that we raise are for illustration

and come from our direct experience. We have new clients that come in all the time and tell us that they have been giving their “Israeli accountant” all the information about their Israeli income, and their “U.S. accountant” all the information about their U.S. income. The first lesson is that a U.S. taxpayer must report all of his worldwide income from all sources. That being said, there are a variety of mechanisms (e.g., income exclusions, tax credits, tax treaty provisions) to make sure that he is not paying tax twice on his income. The next group of clients (or, in this case, non-clients) is the “assumers.” This group assumes that since, in general, tax rates in Israel are higher than in the U.S. (meaning that the tax they already paid to Israel is higher than what they would theoretically have paid on that

income to the U.S.), they do not owe any U.S. tax and do not have to file returns. The second lesson is that there are significant differences between the U.S. and Israeli tax systems and that one therefore needs an expert to review all of the individual’s annual information. These differences can still result in U.S. tax. Two common examples: 1) There is a monthly threshold amount of rental income per individual that Israel does not tax (approximately $1,400). There would have been no tax paid on this income in Israel. Yet it is fully taxed as rental income in the U.S. 2) In Israel, a person can sell one investment property every four years without paying tax on the gain. Thus, if, for example, in 2012 Rivka sold an apartment she bought for $2 million and received $4 million in Israel, she would pay no tax. In

the U.S. she would be required to pay tax on the capital gain of $2 million. The final group consists of the selfemployed and the small business owners (i.e., those who own a corporation). Once again, they believed that since they had been filing returns and paying all taxes in Israel, they had no further U.S. obligations. The final lesson is that even a small “international” business requires application of some special tax expertise. The self-employed individual was classified in Israel as “independent.” Nothing wrong with that; he did everything correctly. But in the eyes of the IRS, he is a self-employed individual. While he might well owe no income tax, he will likely need to pay selfemployment tax on his income. The small business owner, especially if she is reporting her income as sal-

ary, does not have this problem. She is an employee of the company. However, when U.S. citizens own foreign corporations there are additional tax reporting requirements, including the need to provide specific information about the corporation. Both of these groups of individuals need guidance to properly report and, where possible, minimize U.S. taxes. It is important to highlight the fact that during the past two years, the IRS has been especially aggressive in handling (auditing) returns filed by Americans living in Israel. Most of these have been returns of families with children who are entitled to a refund based upon the refundable child tax credit. There are a sizable number of people who are simply no longer filing because they feel intimidated by the possibility of an audit.

Our advice to clients has been that taxpayers are entitled to, and are actually required to, follow the law. If the return as filed is correct, they should receive what is their due. (We are also advising them to assemble the documentation up front in the event that it is requested of them.) U.S. citizenship may have its benefits, but taxation is a significant continuing burden. Your tax professional can help you navigate the unique issues that arise for those who choose to add another citizenship or tax residency. More important, he or she can help you minimize exposure to significant additional taxes and penalties. Steven Ettinger, Esq. ( is director of tax services at Billet, Feit and Preis, PC, a Manhattan firm that has provided tax, audit, accounting and management consulting services since 1936.

Knesset Discusses Major Tax Revisions That Could Impact New Immigrants By Jeff Broide


ecently published draft proposals in Israel relate to proposed changes in the country’s income tax law governing taxation of tru sts along with new immigrants and residents. Broide & Co. has summarized the most relevant aspects pertaining to new immigrants and residents, returning residents, and foreign residents. While these tax-related propositions have yet to be deliberated and approved by the Knesset, they reflect a concerted global effort in recent years to tighten tax compliance. Israel has been very much a part of this campaign. The Holiday Continues – With A Reporting Catch:

The 10-year “Tax Holiday” for new immigrant-, resident-, and veteran-returning Israelis would stay intact, but the exemption from reporting on foreign income and assets would end. As of 2007, the aforementioned returning residents have enjoyed substantial income tax relief under the Income Tax Ordinance. These benefits include: • Exemption from income tax on passive income – i.e., interest, dividends, pensions, royalties, rental and capital gains from foreign sources – for a period of 10 years from the date of immigration or return (including income from sources and assets not held at the time of immigration or return). • Exemption from income tax on income

from a business, profession or trade, or salary earned outside of Israel for a period of 10 years from the date of immigration or return. • There is presently no legal requirement to submit tax reports for exempt income and assets (but Israel-sourced income and assets must be reported). However, the current proposal is to require submission of tax reports within the 10-year exemption period. Taxing Foreign And Local Trusts: Major changes in taxation of foreign trusts are planned in Israel, including taxing on the basis of the Israeli residence of the beneficiaries. Many Israeli beneficiaries, particularly Anglos, may be affected by these proposals.

Foreign-resident grantor/settlor trusts are (subject to certain conditions) exempt from Israeli income tax on foreign income. The proposed amendments include: • Stipulation of close family relationships (as defined) between settlor and beneficiaries. In the absence of such a relationship, the trust will be considered Israelresident. • Upon the death of a foreign settlor, the assets and income will be deemed those of the beneficiaries. Therefore, if one of the beneficiaries is a resident of Israel, the trust will also be considered Israel-resident as of the date of the settlor’s death. This measure is intended to permit a “step-up” in values as of the date of death of the foreign settlor. Ad-

ditionally, allowance is made for foreign beneficiaries’ entitlements to the trust. • Upon the death of a settlor who was a new immigrant, resident, or returning resident, the tax benefits (namely the 10-year tax holiday) accorded to the trust will be discontinued. • Foreign settlor trusts are to be taxed irrespective of the new conditions relating to family relationships (see above). The trustees may elect to pay a 25 percent tax on the taxable income of the trust or 30 percent on distributions – but excluding the portion sourced from the settlor. • Under the new proposals, beneficiaries will be required to report on all distributions, including cash (Existing Law – distributions in kind).

Property owners and investors should note that changes are envisaged relating to property purchase tax, capital gains tax and taxation of rental income. Jeff Broide is a C.P.A. in Israel. Broide and Co. (www.broide. com) is a Jerusalembased C.P.A. firm, providing accounting, auditing, taxation, management and business consulting services. Broide’s professional team provides highquality, efficient services to clients in Jerusalem and the greater Tel Aviv areas. These are merely highlights of certain aspects of the proposed Tax Laws pertaining to taxation of trusts and new immigrants and residents in Israel, and are intended for reference purposes only.

5 The A, B, C’s Of New Business Ventures And Partnership Agreements LEGAL STRATEGY

June 2013

By Jeffrey Folger


ongratulations on your new business! After some serious thought and planning, you and your partner are ready to take the plunge to invest time, money and reputation in a new business venture that you hope will result in positive returns. You begin to lay the business infrastructure, such as signing a lease, opening a bank account, drafting marketing material, and buying computers and other basic necessities (lots of coffee). But wait – is there an elephant in the room that you ignored? I’m referring to your partnership agreement, of course. I cannot count the number of times a client came to me with a tale of woe that can be traced directly to the failure to sign this very important agreement. The partnership agreement is the “roadmap” that serves to clarify and help keep in proper focus the all-important partnership expectations. Partners fail to take this critical step because of one main reason: they haven’t yet been “burned” in a previous business venture and therefore do not appreciate the need and value of this legal document. They instead reason that they’ll spend legal fees only after the business is successful. There is also the element of not wanting to rock the boat at a delicate stage of a new business, and not wanting to confront uncomfortable discussions. However, once the initial start-up dust settles, partners may find that they no longer see “eye to eye.” This imbalance can lead to outright business strife or, at the very least, to partner ill-will that simmers just beneath the surface. For example, it’s not at all uncommon to hear one partner express that he or she is pulling more weight than the other partner and therefore “has the right” to be compensated for the extra time and effort spent. It’s also not uncommon to hear a partner say, for one reason or another, that he or she “has the right” to make the final call on fundamental business decisions. In more extreme cases, which unfortunately do occur, one partner may claim that the other partner is not a partner at all but rather an “investor,” or an “employee.” The scenario of a partner who shows up to work one

fine morning with a son-inlaw in tow may sound eerily familiar. The worst kind of disputes, are those that involve family. A written agreement that deals with family matters, including whether, how and when a partnership should employ a family member, can help avoid much grief. So when is the right time to prepare a partnership agreement? A partnership agreement should in a sense be viewed as a “work in progress” document that’s to be updated as the business develops and matures. But there must be an initial understanding that’s put on paper at the very get-go to address fundamental issues such as: ownership, capital contributions, control and buy-outs. The lesson is: harness that elephant from the very beginning and clearly set forth your partnership expectations in a short and relatively inexpensive legal document. OK, I accomplished the near impossible. I have you convinced that it is in your and your partner’s best interest to have a legal document that sets out your partnership expectation and arrangement. It’s time to become a little technical. First, what kind of document should you consider? The answer depends on the type of company that you choose for your new business. The main categories are: a C Corporation, an S Corporation, a limited partnership and a limited liability company. Each vehicle has its own advantages and disadvantages and these may vary from state to state. So, your first decision is to determine your vehicle of choice and your second decision is to determine the state in which to form your entity. As a general matter, the advantages that you would want are limited liability, tax efficiency, management and oversight possibilities and a flexible capital structure that allows profits, losses and distributions to be shared on almost any basis you select. Your choice of entity may depend on the specific industry and circumstance of your business. I’ll outline the different advantages and disadvantages of these vehicles and explore various issues and considerations in a follow up article. I will assume for now that you choose to form a limited liability company

vehicle (the “LLC”) as it often has the most advantages, and will also assume that the limited liability company is being formed in New York. Setting up the LLC is simple and relatively inexpensive. Your first step is to form the LLC by filing the articles of organization with the New York Secretary of State. You must publish a notice within 120 days of your formation that gives basic information related to your LLC in two newspapers of the county in which the LLC’s principal office is located, one that’s printed weekly and another that’s printed daily, designated by the county clerk. The publications must run for six consecutive weeks and the LLC must then file proof of publication with the New York Department of State. Vcorp Services, LLC and other companies can for a modest fee expedite these state filings and assist you with the publication requirements. The NY LLC law requires the members of an LLC to execute a written operating agreement within 90 days after the filing of its articles of organization. In New York, the LLC partnership agreement is technically referred to as the “operating agreement,” and the owners of an LLC are referred to as its “members.” While I’ll explore the LLC operating agreement in depth in follow-up articles, here are some basic points that should be addressed in every operating agreement. Capital Contributions and Capital Structure; Distributions/Allocations of Profits and Losse –- How much each member must contribute up front and later and who decides when to make distributions should be addressed. The operating agreement might also provide for a mandatory distribution to cover what’s known as “phantom tax” (i.e., income that is reportable as taxable income but that does not generate cash flow for the member). One or more members might be given distribution and liquidation preferences over the others, and some members may also lend money to the LLC on secured or unsecured terms. If there are these loans, the operating agreement needs to serve also as a loan agreement. Management – An LLC is either managed by its members or by managers. Managers of an LLC need


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not be members of the LLC, the same as directors of a corporation need not be shareholders. The operating agreement should therefore specify whether the LCC is to be member-managed or managermanaged. If the LLC is to be manager-managed, then the operating agreement should specify the mechanism for selecting and replacing managers. The operating agreement should also set out whether consent of the members is also required for certain specified major events. For example, the operating agreement might provide that the consent of the members is required for related party transactions. A member might want to have the right to vote on whether and on what terms the LLC may borrow or lend money, lease, sell or buy real estate, and purchase and sell goods and services to or from another member or his or her affiliate. Other examples that may require the vote of the members are the admission of new members, transfers of ownership and the sale of the business. The operating agreement should also detail the percentage vote, whether a simple majority or a super majority, that is needed to carry a proposal, both at the manager level and at the member level. The operating agreement may even provide different threshold percentage requirements for different matters. Transfers – As I’ve already noted, the operating agreement might specify that the consent of the members is needed for transfers; you don’t want to find yourself being partners with someone you dislike, or worse, distrust. The operating agreement should also provide the transfer rules and procedures that are to be followed. For example, the operating agreement may provide that no transfers may be made during the first several years. Sophisticated bells and whistles, such as a right of first refusal, “tag-along” rights (i.e. if a majority member sells his or her stake, then the minority member has the right to join the transaction and sell his or her minority stake in the LLC), “drag along” rights (i.e. the right that enables a majority member to force a minority member to join in the sale of the LLC) might also be addressed, if not

at the get-go then at some time in the future. Non-competition and Non-solicitation Clauses – The members should discuss whether all or some of the members should be subject to non-competition and non-solicitation clauses. Some of the key issues in non-competition and nonsolicitation clauses are the definition of the business, the geographic scope and the duration. Further consideration for protecting the business might be needed if the LLC’s business involves significant intellectual property. Employment Issues – Employment issues, such as salaries, employment contracts, options and other equity incentives, health insurance, pension plans, and fringe benefits might also be addressed. The operating agreement should also deal with events such as death, disability or resignation. Buy-outs/Redemption/ Exit Strategy – Members are not always similarly situated; one member may be looking to build a business for the long term while the other member may be looking for a profitable short term investment. The operating agreement should incorporate the right buy-out, redemption and other related provisions to deal with these and other exit related matters. You and your partner are taking a road trip together. The right business entity and partnership agreement goes a long way to make the journey pleasant and increases the likelihood of reaching a satisfactory and profitable destination. This article is for general information purposes only. It is not intended as professional counsel and should not be used as such. Jeffrey Folger has more than 12 years of legal experience in business transactions and corporate law, principally in the fields of mergers and acquisitions (public and private), finance, securities, private equity investments, joint ventures, private placements and general corporate matters. He was an associate at Sullivan & Cromwell LLP from 2000 until he joined the firm of Oscar Folger in 2003 and the firm was renamed Folger & Folger. He is a graduate of Columbia Law School with Kent Scholar academic recognition. He can be reached at



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NY Entrepreneur Promotes Trade Between U.S. And Israel THE BIZ OF TRADE


hen he’s not bringing highprofile Hollywood celebrities, prominent Christian pastors or African-American and Hispanic community leaders to Israel, as the director of America’s Voices in Israel (a division of the Conference of Presidents), Irwin Katsof, who is also the CEO of Katsof Energy Consulting, is arranging vital trade missions between American private equity, venture capital and real estate fund managers, and institutional investors from Israel’s largest insurance companies and pension funds. The most recent trade mission, which was certified by the U.S. Department of Commerce, took place in Tel Aviv last week. The importance of the trans-oceanic business connection also attracted America’s ambassador to Israel, Daniel Shapiro to the two-day confab. “I have been working closely with the U.S. Commerce Department for eight years now. throughout Asia and Eastern Europe, to assist my compa-

(L-R) Irwin Katsof; Daniel Shapiro, U.S. ambassador to Israel; and Chaim Cohen, CEO of Dun & Bradstreet Israel. ny and other American companies expand their trade,” Katsof told The Jewish Press. “The U.S. Commerce Department started this excellent program, the certified trade mission, to help U.S. private equity and venture capital funds raise equity outside the U.S. Being

an entrepreneur myself, I know how difficult it is to raise capital to launch new companies. “And, having four children and 12 grandchildren in Israel, I care deeply about the relationships between these two great countries, so I offered to arrange a cer-

Golan Wines Reaches New Heights THE WINE BIZ


rankings since the turn of the century. The Decanter World Wine Awards in London is renowned for a rigorous judging process, with over 200 judges tasting over 14,300 wines.

Additionally, the Golan Heights Winery’s Yarden range also picked up a silver medal for their bubbly Blanc De Blanc which competed next to the top champagnes from the French region.

institutions. Without all the partners working together – private sector in the U.S., private sector in terms of D&B in Israel, U.S. Commerce Department and the U.S. embassy, it would not have happened. It was a perfect model of what true cooperation can accomplish.”

Reported by Steve Walz

Israel’s Ministry Of Tourism Targets New York Area Tourists BIZ OF TOURISM


or the sixth consecutive year, the Golan Heights Winery in northern Israel has been awarded medals during a renowned international competition, this time at the Decanter World Wine Awards in London. The Golan Heights Winery’s Yarden Heightswine-2011 won the award for “Best in Show” for the regional category of “Sweet Wines from the Middle East, Far East and Asia.” The Heightswine is an aromatic dessert wine and is no stranger to international awards, having captured no fewer than eight gold

tified trade mission to Israel. Randy Mitchell, of the International Trade Administration, a visionary who created this program, agreed to do it in Israel. Ambassador Shapiro and the U.S. Commerce Department also agreed, while Dun & Bradstreet Israel invited the Israeli

Chaim Cohen, president and CEO Dun & Bradstreet Israel also praised the initiative. “It was a great honor and a pleasure to be able to bridge Israeli NBFI’s (nonbank financial institution) with U.S. fund managers, creating a connection that will benefit both sides,” he said. “Dun and Bradstreet is a natural partner for such ventures and I deeply appreciate the close and personal involvement of Ambassador Dan Shapiro and the embassy team. “Israeli financial institutions are seeking new investment opportunities in Israel and globally for part of their US$175-200 billion portfolio of funds. ‘OTM’ (other people’s money) managers, provident funds and the like absorb on a monthly basis large amounts of funds, while the opportunities in the local market satisfy only a part of their investment appetite. The Israeli market is an attractive market for investments in equity and debt but investors are also looking for diversification of risks and return. It is of extreme importance to be able to invest in a fund that is fully complying with all new and old regulations.”

srael’s Ministry of Tourism (IMOT) has launched a targeted campaign to promote incoming tourism to Israel from the New York region, with an emphasis on the culture, history and religion market. The campaign, with a budget of NIS 9 million (nearly $2.5 million), is based on a market survey carried out by IMOT to target and optimize marketing activities. The campaign, featuring the slogan “Israel – Beyond Belief,” is appearing across different types of media. As a result of the market survey that the IMOT commis-

sioned last year in various markets within the U.S. and as a result of marketing budget cuts, it was decided to focus promotional activities on the Greater New York region. Research showed that the New York region, which accounted for the major incoming tourism traffic from the U.S., has the greatest tourism potential. The research also showed that the desire and readiness to purchase the Israel tourism product was relatively low in the Greater Los Angeles area and South Florida, and pointed to New York area as the region in which to concentrate marketing activities. The United States is the largest source

country for incoming tourism to Israel. In 2012, 618,000 tourists arrived in Israel from the America, with nearly 33% coming from the New York area. Dr. Uzi Landau, Israel’s Minister of Tourism said, “For years, the United Stateshas been the largest source country for incoming tourists. We attach great importance to the role of tourism in maintaining close bi-lateral relations and we will continue to work towards increasing the numbers of American tourists to Israel. Israel is a cradle of culture, history and religion and I am sure that every American tourist will find in Israel a source of inspiration.”

7 Why Israelis Are Increasingly Buying Into The American Dream INVESTMENTS

ď€ June 2013

ď Ź

By Aaron Harow


lthough political relations between Israel and the United States may fluctuate, economic ties continue to thrive. As the U.S. remains Israel’s largest single trading partner, much has been made in recent years of the parallels between the entrepreneurial spirit of Silicon Valley and Israel’s ‘Start-Up Nation’ reputation. Indeed, over 200 major U.S. hitech ďŹ rms have opened R&D centers in Israel over the last two decades. But there is another U.S.-Israel economic boom that has largely gone unnoticed. Israeli investment in U.S. real estate is no longer the preserve of Tel Aviv’s elite, as a noticeable increase in property purchases by the average Israeli is well underway. Perhaps this trend should not be so surprising. After all, having been ranked as the 19th most competitive economy in the world in 2012, Israel has truly become a global economic force to be reckoned with. It is therefore no wonder that the purchasing power of the average Israeli is also gaining strength. Even back in 2011, Israelis comprised the second largest group of foreign real-estate buyers in

the United States. However, much of this was limited to commercial transactions, a shopping mall here or an ofďŹ ce tower there – the domain of Israel’s mega-rich. Times are changing, though, and Israel’s business media is peppered with articles on affordable U.S. single-family properties, while experts note a shift from Israeli property investment in Eastern Europe to the East Coast and beyond. A quick glance at the differing fortunes in the Israeli and American housing markets shows why property investment in the U.S. is no longer out of reach for Israelis. Latest reports indicate that Israeli property prices show little sign of dropping signiďŹ cantly in the immediate future. They remain distinctly similar to the high prices that peaked in 2009. As a result, even if Israelis can afford it, purchasing property in one of the country’s desirable areas is unlikely to produce hugely impressive returns. There are, of course, some interesting opportunities to explore outside of Israel’s crowded center, but predicting exactly where those bargains might be is at best an imprecise science. Consequently, the determined Israeli investor is increasingly looking

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ď Ź

abroad for a sound investment opportunity. Although the idea of a middle-class Israeli buying his own little piece of America may have once sounded improbable, it is now a very realistic option. Most experts agree that even if the ďŹ nancial storm has not yet entirely passed, it has already wreaked its damage on the housing market. Analysts at the global ďŹ rm UBS say that home prices in the U.S. have been rising since the end of 2011, with the median price of the average family home increasing by 8.8 percent since then. Nonetheless, although the recovery may have begun, the U.S. housing market still faces a steep challenge before returning to anywhere near its pre-crash heights. Meanwhile the rental market has remained stable, with many people unable to afford to purchase a home or skeptical about the wisdom of doing so. Hence, the ďŹ nancial stars have aligned, presenting a timely moment for Israelis to invest in U.S. property â&#x20AC;&#x201C; with a slow upward market trend already in place. For most Israeli investors, taking advantage of this has meant looking way beyond the bright lights of New York and the sandy beaches of Califor-


A Business & Finance Supplement

nia. Some of the most attractive locations are those that are in decent shape following the property meltdown. Texas, for example, is rooted in the everproďŹ table energy sector; that market has thus remained stable. And Pittsburgh has evolved from an industrial heartland to a hub of intellectual capital and innovation, making it an attractive prospect in which to establish a small corner of Israel. Israelâ&#x20AC;&#x2122;s ďŹ scal resilience throughout the global ďŹ nancial crisis has permitted many Israelis to be at an unfamiliar monetary advantage on the world stage. Their impact on the U.S. real-estate market represents not only a healthy ďŹ nancial development, but also an opportunity to further foster relations between the two countries. As more Israelis become personally invested in the U.S. economy, their interaction with Americans on professional and personal levels will inevitably increase. This new chapter in â&#x20AC;&#x153;real-estate relationsâ&#x20AC;? can only strengthen the unbreakable U.S.-Israel alliance. Aaron Harow is a partner at BRHE Group LLC, a real-estate company specializing in investments in the U.S. and Israel.



A Business & Finance Supplement

June 2013

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