Q&A About John Cunningham’s Background and Law Practice

Attorney John Cunningham

1) Describe your law practice and what it means to you personally.

My law practice is focused on LLCs and on new Internal Revenue Code section 199A.

  • LLCs have greater flexibility and they provide much stronger statutory asset protections than any other business organization form, including corporations. They also provide tax benefits that corporations cannot provide.
  • Section 199A provides owners of small businesses with extraordinary federal income tax deductions from their business income. These deductions can exceed 20 percent of owners’ business income, and they are available to at least 50 million American business owners.

I find it deeply satisfying to make LLC legal and tax benefits available to my LLC clients. I find it particularly satisfying to draft operating agreements for clients who are members of multi-member LLCs, since these agreements, if well drafted, will often spell the difference between business success and business failure for my LLC clients.

I also find it deeply satisfying to help my section 199A clients maximize their deductions under that section. These deductions, like LLC benefits, can protect these clients from business failure and can pave the way to major business success. They can save my clients thousands of dollars in federal income taxes every year.

Furthermore, both my LLC practice and my section 199A practice are challengingly complex, and they offer many opportunities for writing and teaching—two of my favorite activities.

2) Tell me about your personal background.

I was born in Sacramento, California, and grew up in Baltimore, Maryland. I attended Fordham College and Fordham University, where I majored in Greek and Latin Classics and obtained a master’s degree in philosophy. In my first job, I taught philosophy at Georgetown University, but then I decided to become a lawyer and attended the University of Pennsylvania Law School. My family and I have roots in New Hampshire, and we’ve lived in Concord, NH for the past 20 years. My wife Martha and I have two grown daughters—one in California, the other in Connecticut—and we have three grandchildren. We also have a two-year old cockapoo named Ollie. Martha and I love to read and to visit art museums, and we are active in community politics.

3) Why did you decide to stop teaching philosophy and become a lawyer?

I love philosophy—particularly the philosophy of John Dewey and the existentialists. But after a few years of teaching philosophy, I decided I wanted to do something more practical in my career, and also, to be frank, to earn a decent income. But I would gladly teach philosophy again part time if I had the time. I think my experience of studying and teaching philosophy has had a major impact on my practice of law.

4) Tell me about your legal career.

I began my career as a trial lawyer for five years at the Tax Division of the U.S. Department of Justice. Then I became a member of the Foreign Trade and Tax Department in the Chicago office of the international law firm of Baker McKenzie LLP. Now I have a law firm of my own—the Law Offices of John M. Cunningham, PLLC—in Concord, NH. I’m licensed to practice law in New Hampshire and Massachusetts, and I represent clients in other states in accordance with local rules. My practice is focused on representing clients in LLC legal and tax matters and in matters involving new Internal Revenue Code section 199A. I am of counsel to McLane Middleton, P.A., a large New Hampshire-based law firm. The McLane firm is a major ally in my practice.

In my practice, I try to keep up not only with LLC law, but also with LLC tax because the two fields are so interdependent and because I think this is what my LLC clients need—one-stop services in law and tax. And there is a major practical interdependence and mutual support between my LLC law and tax practice and my section 199A practice.

5) How did you become interested in LLC law and tax?

I always felt that state-law business corporations were too complex and inflexible for the relatively small, privately held businesses I’ve been representing for the past 20 years. When I learned of the emergence of LLCs in the early 1990s, with their tremendous legal and tax flexibility and informality, it was immediately obvious to me that these new entities could meet a critical unmet need of American business owners. So I began a full-time LLC practice. I also formed a group of New Hampshire lawyers and accountants, we drafted the first New Hampshire LLC act in 1993, and I chaired the committee that rewrote that act in 2013.

6) What are the main things you do as an LLC lawyer?

I form LLCs for my clients; I plan, negotiate and draft LLC operating agreements for them; when they request, I review and revise operating agreements drafted by other lawyers; I handle sales, purchases and dissolutions of LLCs and other LLC transactions; and I represent LLC members in internal LLC disputes.

7) How did you become interested in section 199A?

Section 199A provides federal income tax deductions to owners of pass-through businesses. These deductions can amount to 20 percent or more of their net business income. For many of my clients, section 199A deductions can mean the difference between business success and failure. However, many business owners must substantially restructure their businesses to maximize their deductions.

I first learned about section 199A on December 22, 2017, when President Trump signed into law the Tax Cuts and Jobs Act of 2017 (the TJCA) and the contents of that act first became public. Section 199A is set forth in section 11011(a) of the TCJA, and it became effective on January 1, 2018. It was immediately obvious to me that section 199A would be of great importance to my clients, almost all of whom are the owners of pass-through businesses. I also quickly became aware of the extreme complexity of the section and of the difficulty of applying it in a manner that would maximize business owner deductions. So I decided to master it, to make it a major new component of my practice and to write a book and teach seminars about it. That’s what I’ve been doing ever since.

8) What are the main things you do as a section 199A lawyer?

I review the legal and tax structure of my clients’ businesses from a section 199A viewpoint; I recommend ways in which they can restructure their personal, financial, business, and federal tax arrangements to maximize their deductions under the section; and I help them with this restructuring. For example, for clients whose businesses are S corporations, I help them to convert these corporations to sole proprietorships or partnerships when this will increase their section 199A deductions.

9) Why do you like to write and teach about law and tax?

Because it’s the best way for me to learn law and tax. And because I feel it’s a useful service to other professionals and to business people.

10) What have you written?

I’m the principal author of Drafting Limited Liability Company Operating Agreements, the leading U.S. LLC formbook and practice manual, published by Wolters Kluwer Law & Business.

I’m also the author of Maximizing Pass-Through Deductions Under Internal Revenue Code Section 199A, also published by Wolters Kluwer. It’s the only book on section 199A published by a recognized legal and tax publisher.

In addition, I’ve written many dozens of articles for legal and tax journals and newsletters, including, most recently, “Computing Pass-Through Deductions Under Internal Revenue Code Section 199A,” a 7,000-word article for Tax Notes, a leading daily federal tax information service.

11) What are your main objectives in serving your LLC clients?

By listening carefully and asking questions as creatively as I can, I try to understand their needs and interests in the LLC transactions in which they’re involved; I draft operating agreements and other documents in which I do my best to meet these needs and achieve these interests; and, to the extent they want, I teach them about the LLC law and tax relevant to them.

For example, if they want, I teach them how to avoid “veil piercing,” the judicial doctrine that lets plaintiffs who sue LLCs take not only the LLC’s assets but also the personal assets of their members.

When I first begin working for my LLC clients, I e-mail them a memo with questions about their LLC deal. Once I’ve gotten the answers to those questions, I usually write LLC planning memos for them. These memos propose the terms I think will be best for them in their operating agreements. Then I draft these agreements for them.

12) What are your main objectives in serving your section 199A clients?

My main objectives are to maximize my section 199A clients’ section 199A deductions and, in the process, to minimize their federal income tax and Social Security tax liabilities.

13) What, if any, is the relationship between your section 199A practice and your LLC practice?

My LLC practice and section 199A practice are very different from one another, but they are profoundly interdependent, they strongly support each other, and both types of practice are indispensable both for LLC clients and for section 199A clients. Ensuring maximum section 199A deductions for LLC members for their LLC income is a central issue, not only for start-up LLCs but also, in any type of transaction, for existing LLCs. And section 199A deductions often cannot be maximized for owners of non-LLC entities except with a sophisticated use of LLCs. In other words, you can’t separate section 199A practice from LLC practice. If you’re not an expert in LLC law and tax, you can’t be a section 199A expert, and vice versa.

14) Is Concord a good place to practice law?

Concord is the small New England city pictured in this website. For me, it’s a perfect place to practice law. It’s an attractive, well-managed, convenient, and friendly town; it’s the capital of New Hampshire; and the University of New Hampshire School of Law is located in Concord. The UNH School of Law has a fine law library and excellent professors, and I’ve hired many of its students as law clerks. The McLane firm has a lovely office on Main Street in Concord, where I meet my clients. And Concord is a quiet town where it’s easy to think and write without distraction.

15) When do you plan to retire from your practice?

Never. I like what I’m doing, and I feel I’m providing worthwhile service to my clients.

16) Do you work with your clients’ lawyers and accountants in your LLC and section 199A practice?

Yes, I work as closely as possible with them and learn facts from them about my clients that are critical in my service to them.

17) What do you view as the relationship between you and the accountants who serve your section 199A clients?

I view my cooperation with the accountants of my section 199A clients as absolutely indispensable in my service of these clients. Among many other factors, the fact that these accountants prepare the tax returns of these clients means they have a substantially more comprehensive understanding of their overall tax situations than I could possibly obtain on my own. Furthermore, many accountants know as much as I do about section 199A itself—and some know more. However, I am sometimes able to provide legal advice and services to these clients that their accountants may be unable to provide unless they are also lawyers.