Continuing the last post’s discussion of the fictitious business name (FBN – or, colloquially, the DBA for “doing business as”), this post is prompted by a client’s question as to when his company should apply for its fictitious business name.
California Business & Professions Code Section 17910(a) states that a Fictitious Business Name Statement must be filed within 40 days of the time when the FBN first was used by the registrant to conduct business in the state.
The Statement is files with the County Clerk in the county where the registrant’s principal place of business is located in the state, or in Sacramento County if there is no such place (Business & Professions Code Section 17915). In addition, if the registrant wishes, FBN Statements can be filed in other counties.
After the FBN Statement is filed, it must be published in a newspaper of general circulation once per week for four successive weeks (Business & Professions Code Section 17917; Government Code Section 6064).
The process is not difficult, and there is a statutory incentive to do things right: No lawsuit may be brought based on a contract or transaction entered into under the FBN until the filing and publication procedures have been complied with (Business & Professions Code Section 17918).
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Follow-up: As noted by Staci Riordan on the Fashion Law Blog, when you choose a fictitious business name, you should think about whether to register the name as a trademark or service mark.
This blog does not provide legal advice and does not create an attorney-client relationship. If you need legal advice, please contact an attorney directly.
Two recently-acquired clients had similar situations that brought up the importance of complying with legal requirements.
Each company is a multi-founder startup where one founder became non-productive, and even somewhat detrimental to the business. The other founders wanted to move the problem founder off to the side, where he could cause no more trouble, in a manner that would be fair to everyone involved.
Unfortunately, each company had failed to comply with some of the most basic legal requirements: Holding annual shareholder meetings to elect directors, annual board of director meetings to appoint officers, etc. As a result, in each instance we had to spend time and money taking corporate actions, and recording those actions appropriately in meeting minutes, before the real problem could be solved.
So here is my view of how important legal compliance is:
- Without question, top priorities include making sales, delivering products / services, and taking in revenue.
- When it comes to administrative tasks, however, legal should be closer to the top of the list than the bottom. If legal affairs are not in order, problems can become greatly magnified.
Photo credit: stock.xchng
This blog does not provide legal advice and does not create an attorney-client relationship. If you need legal advice, please contact an attorney directly.
I recently had a conversation with an attorney in Louisiana, who mentioned that in that state, the annual interest rate on a promissory note was limited to 12%. I told him that in California story is much different.
Article 15 (Usury) of the California Constitution states (simplifying a bit) that the annual interest rate on a loan or forbearance (refraining from requiring payment for a period of time) is limited as follows:
- If arising from money or goods supplied for personal, family or household purposes, the maximum interest rate is 10%.
- If arising from money or goods supplied other than for personal, family or household purposes, the maximum interest rate is the greater of (a) 10% or (b) 5% plus the rate charged by the Federal Reserve Bank of San Francisco on advances to its member banks.
- If the agreement between the parties does not specify an interest rate, it will be 7%.
Key point #1: The constitutional usury rate does not apply in situations other than loans and forbearances. So, for example, a promissory note executed in connection with the purchase and sale of a business, or late-payment terms in an agreement for the performance of professional services, may have whatever interest rate the parties may decide is appropriate.
Key point #2: In addition to the Constitutional requirements, there are quite a few situations where statutes prescribe maximum interest rates in specified circumstances, such as shared-appreciation loans, secured transactions, corporate securities, financial lenders, and government. So even in a business or professional context, there may be a restriction on the applicable interest rate.
Graphic credit: Microsoft Office Online
This blog does not provide legal advice and does not create an attorney-client relationship. If you need legal advice, please contact an attorney directly.
A customer owes you money but is disputing the amount that should be paid. To your surprise, you receive a check for half of the amount in question. On the back, the customer has written “Payment in Full”. If you deposit the check, will you give up the right to ask for the other half of the disputed amount?
The answer depends on which state’s law governs the transaction. I will provide an answer based on California law.
“Payment in Full” or a similar legend is referred to as a restrictive endorsement. Enacted in 1987, California Civil Code Section 1526 at one time allowed the recipient, under certain circumstances, to strike out the restrictive endorsement, deposit the check, and seek payment of the rest of the disputed amount.
However, in 1992 that statute was superseded by Commercial Code Section 3311, which states that, generally, if there is a bona fide dispute and the check bears a prominent restrictive legend specifying payment in full, then by depositing the check the recipient accepts the check as full payment and gives up the right to ask for the rest of the disputed amount.
The bottom line: In California, a restrictive endorsement on a check generally will be enforced.
This blog does not provide legal advice and does not create an attorney-client relationship. If you need legal advice, please contact an attorney directly.
I have wanted to write this post for several months, but until now I have held off because of concern that it would come across as a lawyer saying “buy my services”. Today, though, a conversation with a client drove home how important this topic is.
On several occasions, clients have asked me to dig them out of trouble that occurred because they had entered into agreements without the advice of legal counsel. Some examples:
- Client #1 retained an independent contractor by adapting, with minor revisions, the company’s standard-form employment agreement. The parties had a falling out. The contractor demanded payments to which he was not entitled. The contractor’s counsel pointed out (rightly) that if the contractor were to file a wage claim, he would prevail because of the employment language in the agreement, and Client #1 would end up paying far more than the amount that the contractor was seeking. Client #1 ended up paying tens of thousands of dollars that it would have saved if it had used the proper form of agreement.
- Client #2 bought the assets of a small business in the Midwest pursuant to a letter agreement that set forth only the essential business terms. The seller had told Client #2 that an application to license the properties of a major sports organization had been favorably received and was in process. More than a year later, Client #2 learned that the application already had been denied at the time the assets were acquired. Client #2 had to pay several hundred thousand dollars in past-due royalties and penalties to the sports organization before it would enter into a license agreement with Client #2.
- Client #3 and another company wanted to enter into a joint venture to develop a software product, but negotiations for the joint venture failed. Instead, the parties agreed that Client #3 would develop the software and would grant the other company a license to use it. Client #3 signed a license agreement that had been prepared by the other company. Shortly thereafter, the other company filed a patent application based on technology underlying the software in question, asserting that its employees were co-inventors with the employees of Client #3. Now, the only way Client #3 might be able to stop the other company from receiving a patent is to file its own patent application, resulting in an interference proceeding – but the cost of this approach is so high that that Client #3 may just do nothing, ultimately being unable to use the software that it developed because it infringes the other company’s patent!
Not every agreement need be reviewed by a lawyer. If, for example, there is a great disparity in negotiating power such that the more powerful party can say “take it or leave it”, there may not be a lot that a lawyer can contribut to the process.
But if an agreement is important because of its subject matter, or the amount of money at stake, or because it bears on critical company operations, then the most prudent course is to seek the advice of legal counsel.
This blog does not provide legal advice and does not create an attorney-client relationship. If you need legal advice, please contact an attorney directly.
