Dangerous Liaisons

A Look At The Law

The Federal Election Commission (FEC) has established clear rules for candidates seeking federal office. No business may donate money or services to a federal election campaign except in a few narrowly defined circumstances. The corporation may establish a separate federal political action committee (PAC) to solicit contributions from managers of the corporation, but it may not coerce those employees to contribute or reimburse anyone for doing so.

A multicandidate PAC (a special designation with additional requirements) can give up to $5,000 per election to a federal candidate. Otherwise, even after establishing a PAC, the limit is $1,000 per candidate per election. The value of services such as employee time spent preparing political mailings are considered contributions to the candidate. A corporate PAC may provide such services to a federal candidate, but the value of such services counts toward the total contribution limit.

"It's fairly simple to set up a PAC," says Frederick G. Slabach, associate dean of Whittier Law School in Costa Mesa, California, who has extensive experience in political action and campaign practices. It involves filing papers with the FEC, selecting a business owner or manager to serve as fund treasurer, designating a bank account and signatories, and filing forms on contributions from individuals to the PAC and expenditures from the PAC to federal candidates or for other political advocacy. "You might run it by your lawyer, but the process is designed [so you don't] need one," Slabach says. "Just be sure to follow the guidelines on whom you may solicit."

As the owner of the business that set up the PAC, you're bound by the same limits as any other individual: $1,000 from personal funds to a federal candidate per election. (A single candidate's primary, primary runoff and general election are considered separate campaigns.)

Laws concerning state and local campaigns vary dramatically from state to state. Check with your secretary of state or your state's fair political practices commission for the laws in your area.

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This article was originally published in the October 1998 print edition of Entrepreneur with the headline: Dangerous Liaisons.

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