2013: My Originating Year of Much Less Stuff and Paper 

Posted by BL Speer & Associates Tuesday, January 15, 2013 11:17:00 AM

by Brenda Speer

This post first appeared on the SOLOinCOLO blog,
an online community of Colorado solo and small firm attorneys.

I have never been one to make resolutions, so don’t let the title fool you into thinking that I have made one for this year. Rather, it’s just that the new year gave me a nice, clean date-certain going forward from which I have decided to make my office, and home, as paperless as possible, as well as to stop keeping every speck of stuff and iota of information.

I am a bit of a (okay, an extreme) neat freak, keeper of things, organizer and detail person. Yet, I have forced myself to acknowledge that I hang on to too much and some of it is duplicative. For instance, why do I keep a copy of an email on my computer and print it out and file it? Hmm, I realize I have no good answer for that question. One or the other action will suffice, so perhaps I should stop this silly behavior.

My inspiration to endeavor to curb this habit of mine came about several years ago when one of my grandmothers was moved into assisted living. The arduous task of purging and closing her home fell to one of my sisters who lived nearby. During a conversation with my sister in which she regaled and horrified me with stories of the endless stuff she culled (some of which we wondered why Grandma even still had it, like banking records from the 1950s), I joked, “I’m going to change my final instructions in my will to state: ‘Go to house, burn to ground.’” Rather than dare someone to commit arson, I thought it better to get my own house, literally and figuratively, in order.

I’ve been doing a mix of mostly digital and partly paper storage for a while now, but that still meant having and looking in two places for things. So, I decided to commit fully to digital as of January 1. I expect to see savings on office supplies expenditures over the coming year. Furthermore, I have long refused to purchase another file cabinet.

Here are some concrete examples of changes I’m making in the administration of my office and practice and how I’m doing them.

The Goal and End Result: One Copy, Digital Only, in One Place.

Vendor Files

In the past, each fiscal year I set up physical file folders for every vendor, including banking, and kept paper records of receipts, orders, payments (check stubs), statements, invoices, etc. This fiscal year I set up a digital file folder for every vendor.

I already receive digital statements from almost every vendor I have. When available, I save or download a copy of receipts, orders, payments, statements, invoices, emails, etc. to the file. If not available, then I scan a copy to the digital file. I do not retain the paper and deposit it in my shred bin (my shredding service also recycles-bonus!). I also do not retain the information anywhere else on my computer, such as the email with an attached statement in an Outlook folder.

I have also decided to determine at the outset whether I even need to keep the information. For some things, like check stubs and bank deposit receipts, I have decided not to keep those in any format once I’m done with them (i.e., after the check is cut [stubs] or end-of-month reconciliation [deposit receipts]). I already have all that information captured in my accounting program and monthly bank statements, so do I really need the check stubs and receipts, too? I decided I don’t.

I use Adobe Acrobat Pro to scan to pdf, as well as to convert and save directly from a browser and other programs. I use an all-in-one machine (able to photocopy, print, scan [in color, grayscale or black and white] and fax) with a document feeder and duplexer to auto-feed and scan double-sided documents. I am finding that scanning and saving doesn’t take me any more time than paper filing (printing pages, stapling pages, hole-punching pages, placing in the file folder with fasteners, filing the folder in the file cabinet and so on).

Client Files

For every client matter I used to set up a physical file folder, as well as a digital file folder (auto-generated by the practice management software I use, PC Law). I have decided no longer to set up physical file folders and to maintain everything in the digital file. Again, if not already available in digital form, I scan everything paper into the appropriate client matter file (signed Fee Agreement, client originals, my meeting notes, etc.) and consign the now-non-relevant paper to the shred bin. That doesn’t mean I don’t use or have any paper, but I use and have a lot less of it. If I work on something in hard copy, like a contract review, when I’m done, I shred the working copy.

Over the 24 years I’ve been practicing law, I have always used the physical file folders as visible reminders and organizers of my workload and priorities in my office. At first I had some anxiety about not having that system anymore. However, in lieu of that, I have created a spreadsheet to track all pending matters with relevant details—everything in one place for easy referral—and I’m finding it works better for me. Anxiety relieved, trees saved, humanity and nature sigh together.

Resource Files

I have a collection of three-ring binders in my law library in which I have kept and organized by topic various articles and cases relevant to my practice areas. These will live on, but any new resource information will be retained in digital form only and added to my existing electronic form file system.

I only wish I’d had the foresight and fortitude to have forced myself to have gone all-but-digital sooner!


© 2013 BL Speer & Associates

 

Practicing Thanks 

Posted by BL Speer & Associates Wednesday, November 21, 2012 10:00:00 PM

by Brenda Speer

This post first appeared on the SOLOinCOLO blog,
an online community of Colorado solo and small firm attorneys.

It’s the time of year when we give thanks, assess the year that has passed and plan for the year ahead. Although I am thankful for many people and events in my life, I have never really reflected on whether I am thankful for being an attorney. Upon reflection, I find that I am.

I am thankful for the legal profession that has kept me challenged and gainfully employed for more than 23 years. I enjoy reading, writing, research, analysis and problem solving—all skills I use every day in my law practice. After all these years I find that being an attorney is a suitable match for me.

I am thankful for my solo/small firm practice that enables me to choose the cases and clients I want to represent which results in the aforementioned appreciation and payment, as well as a self-directed work load and lifestyle. At times the monetary reward is better than others, but I alone am mistress of my fate.

I am thankful for clients who listen to and heed my advice and show their appreciation by prompt payment in full. I’ve even received cards, hugs and homemade cookies as thanks!

I am thankful for generous colleagues who are willing to advise, guide and mentor me and share their wisdom, knowledge, work-product and hard-learned lessons of the legal profession. I try to return the favor when called upon by my colleagues.

I am thankful for opposing parties and attorneys who try to resolve problems outside of a lawsuit and the courtroom, rather than thumbing their noses at my client and me and responding with a triple-dog-dare-you etiquette breach of “Sue me!” If a client is in the wrong, then he or she should be counseled to offer an apology and a settlement at the outset and save all of the parties a lot of time, money, effort and emotional grief and spare them a protracted dispute. Not only is it our professional, ethical duty to do so, but also just plain good manners and civil behavior to guide our clients along the path of resolution rather than vengeance.

I am thankful for never having had a grievance or malpractice claim in more than 23 years of practice. I will, however, continue to carry professional liability insurance and hope I never have to use it—the same can be said for all the other business and personal insurance policies I have. So far, I’ve been very fortunate in that I have only had a few minor, property-related claims (stuff can be replaced).

I am thankful for working with a like-minded attorney who shares my views on practicing the law, counseling clients and running our office. We have fun working and hanging out together, to include our occasional, in-house, Friday afternoon happy hour. After all, a girl’s gotta have some perqs for being self-employed.

I am thankful for having had to date a half-century of charmed life.

I wish you and yours a very Happy Thanksgiving!


© 2012 BL Speer & Associates

I Am an Original Work of Authorship! 

Posted by BL Speer & Associates Wednesday, November 14, 2012 7:38:00 PM

by Brenda Speer

This summer, I achieved the half-century mark. My friend and business associate, Danette Lilja, gave me this fabulous cake for my birthday. (I greatly enjoy cake, preferably white cake with butter cream frosting, which this cake was and it was...Yummy!)

I posted this photo on my personal Facebook page with the caption "I am an Original Work of Authorship!" The posting sparked a lively commentary banter among my lawyer friends and myself as to whether I was an original work of authorship. (Yes, we are intellectual property law geeks.) Here's my response to all of them.

Dear Esteemed Friends and Colleagues in the Law:

Your comments to my Facebook photo posting of my birthday cake have inspired me to respond in law-school-exam-essay fashion.

When I posted the photo, I claimed that “I am an original work of authorship!” I stand by my claim. You are all disputing whether I own the original work. My analysis and conclusion on these issues follows.

Let us assume for purposes of discussion that I do qualify as an original work of authorship under the US Copyright Act as a sculptural work. Otherwise, we can end the discussion right here and we’re all wrong, because I am not a literary work (although I dabble at writing), musical or sound recording work (although I play an instrument), dramatic work (despite my tendencies), pictorial or graphic work (I like to think of myself as three-dimensional versus two), motion picture or audiovisual work (although I like to think I’m easy on the eyes), nor architectural work, pantomime or choreographic work (these last three options were not available under the 1909 Act, see below).

Copyrights arise upon creation (my conception) of the work (me). The work created is known as an original work of authorship. Thus, I am an original work of authorship. However, although my point is proven, I do not rest my case yet.

Second, absent a work made for hire or written transfer, ownership of the copyrights in the original work of authorship (me) vests in the creator or creators (my parents), which creators are referred to under the US federal copyright law as author(s).

I am not a work made for hire, because regardless of the birth labors of my mother, there was (1) neither an employer-employee relationship between my parents and myself at creation (conception), nor (2) did I qualify (at conception) as one of the 9 federal statutory types of original works that can be a work made for hire per a written agreement between the parties (plus there was no written agreement).

Therefore, upon my conception and through gestation and delivery, my parents retained ownership of me. During the time I was in utero, I was an unpublished work (that is, not in public view, as there were no sonograms in those days).

Do my parents still own me? (If so, then where is my allowance? It is decades past due. I’m sure the accrued interest, let alone the principal, is a staggering sum.) Was a written transfer of ownership affected post-conception, such that I own myself? Or did I fall into the public domain?

By doing the math, I have determined that I was conceived in 1961 and born in 1962. Accordingly, I am a pre-January 1, 1978, work of authorship and the 1909 Copyright Act applies to me as a work.

Under the 1909 Act, copyrights of published works (I have been in public view since birth, so I am a published work) are perfected by a registration with the US Copyright Office. At my birth, my parents did not have the benefit of their daughter’s future legal knowledge and advice, nor other sage legal counsel, and in their ignorance, they did not register me.

Also under the 1909 Act, a failure to register a published work deems it dedicated to the public by operation of law. So, I must conclude that I am a work in the public domain. Works in the public domain are owned by no one. Alas, despite my powers of self-possession, I must conclude that I am ownerless.

Thank you for the interesting mental exercise which has disheartened me, but provided me with fodder for my BLog O’Speer & Associates. You can find out if I really post it by subscribing to the blog at www.blspeer.com/blog.aspx (thinly veiled request for validation).


© 2012 BL Speer & Associates

You Have NOT Reached Free Legal Information Central 

Posted by BL Speer & Associates Monday, October 15, 2012 12:00:00 AM

by Brenda Speer

This post first appeared on the SOLOinCOLO blog,
an online community of Colorado solo and small firm attorneys.

Some days I cynically think that I should answer my office phone, “Free Legal Information Central.” I just had one of those calls and it provoked me to gripe about it in this blog post. Here’s how it went:

“BL Speer & Associates, how may we help you?” (Yes, I answer the phone myself.)

“Do you do trademark work?”

“Yes, we do.”

“I’m buying a business and it has a federal trademark registration. Aren’t those worth like $10,000?”

“It depends on the value of the business.”

“Do you have to renew the registration?”

“Yes, every 10 years.”

“Okay. Thanks for your help.” Click. (At least he said ‘thanks.’ That’ll help pay the bills—not.)

What is it about the legal profession that some people expect you to pay the cost of education, rent, phone bill, insurance, staff, etc., and sit around all day and give your knowledge away to them for free? Do these people walk into a restaurant, tell the server they’re really hungry and ask for a free meal? Do they call painters and ask for them to paint their house for free? Do they call doctor offices and ask for a free diagnosis and prescription? (Probably.) Where do they get the unmitigated gall to call a law firm and ask for free legal advice?

I think part of the blame and misperception can be found in advertising by lawyers who get paid on a contingency fee basis. As a result, the public mistakenly believes that all legal consultations are free of charge and lawyers never get paid unless they win your case. Sorry, Mr. John Q. Public, but there’s no contingency to be won in forming a business, drafting a contract, preparing a will, closing a real estate transaction, securing a patent, copyright or trademark registration, or doing any other type of transactional legal work for you. By the way, those contingency fee basis attorneys whom you think so selflessly and generously work for free? They don’t. They just get paid on a different basis (a percentage of your damages award and you pay for all costs) and timeline (at the end of the case). Also, they’re not going to take your case if they don’t think they can win it. They’re smart lawyers; they don’t gamble and they don’t work for free either.

During another recent call I received, the caller prefaced his remarks with the fact that he’d been in business for over 30 years. He had a new competitor spring up in town who was using the same name as his business. Could we help him with that?

I told him, yes, this matter is within our area of practice.

His next question: “Will you do the work for free?” Say what?! You just told me what a successful business person you are. I doubt that happened by you providing your services for free. Why should I do that?

I politely responded, “No. We do not provide legal advice and services for free.”

His response? None. He just hung up. I assume he tried to find some other hapless lawyer who would oblige him and work for free. I hope all the other lawyers he called also declined to do so.

The other day I got a call from someone selling a motorcycle and he explained the buyer wants a written guarantee regarding repairs done on the motorcycle. Then he asked, “Is that like a legal thing?” I responded with my usual, “We do not provide legal advice and services for free over the phone.”

“Oh. Okay. I’ll try someone else.” Click.

At the outset I knew it would be one of those calls when the first thing he said to me after I answered the phone was (literally, not even a pleasantry of ‘hello’), “Yeah, uh, I just have a quick question.” I felt like responding, “I have a quick answer,” and then just hanging up, but I refrained.

A few weeks ago a musician called and told me he just got offered a recording contract. He wanted to know if I could review it and advise him. I told him, yes, I could help with that. I’m sure you’ve figured out what he asked next. “Would you do it for free?” Again I replied, “I don’t provide legal advice for free.”

His less than courteous response? Dial tone. I know by now not to expect anything more from people who are so rude as to expect me to work for free.

Partly as a result of these experiences, I have acquired the motto: “I’d rather not work and not get paid, than work and not get paid.”

Not only do I not give out free legal advice over the phone, but also I charge for an initial consultation. Why? Because in that consultation I’m providing legal advice. That’s what I do. That’s how I earn my living. I don’t provide legal advice for free either in person or over the phone. Period.


© 2012 BL Speer & Associates

Don't Trade on the Marks of Others 

Posted by BL Speer & Associates Wednesday, July 4, 2012 7:15:00 PM

by Brenda Speer

Businesses presumably want to have a unique identity in the marketplace, right? Then why do some of them trade on the brands of others? Who knows, because it’s not just bad marketing, it’s legally foolhardy.

Piggybacking on someone else’s trademark or creative efforts not only shows an appalling lack of imagination and a large dose of laziness, but also it exposes the piggybacker to serious legal risks. Furthermore, it’s bad from a marketing standpoint, because it doesn’t distinguish the piggybacker from competitors, let alone the company upon whom the piggybacker is trading.

If the piggybacker’s trademark is the same as or similar to another’s mark, then the piggybacker is at risk for trademark infringement.

If the piggybacker’s graphics are the same as or similar to another’s graphics, then the piggybacker is at risk for copyright infringement.

If the piggybacker’s total image and overall appearance of its goods or services is the same as or similar to another’s brand presentation, then the piggybacker is at risk for unfair competition claims such as trade dress infringement and implied endorsement. (Unfair competition is a body of statutory and case law that provides protection from deceptive and improper business conduct in the marketplace.)

To illustrate these concepts, here are piggybacking examples I’ve spotted.

A medical practice named “Wz Up Doc”: And Warner Bros.’ Bugs Bunny:

Warner Bros. has trademark registrations for “What’s Up, Doc” for use in connection with various goods and services. It’s not shy about enforcing its trademark rights and pursued action against a third party who attempted to register “What’s Up, Doc” for use with restaurant services.

Legal risks: Trademark infringement (same trademark), copyright infringement (same graphic), and implied endorsement (is this doctor endorsed by or affiliated with Warner Bros.?).

A dry cleaners and laundry service named
Continental Cleaners:

And Ford Motor Company’s
cross trademark:

Ford Motor Company has trademark registrations for the cross trademark for use with various automotive goods and services.

Legal risks: Trademark infringement (extremely similar trademark), copyright infringement (extremely similar graphic), and implied endorsement (is this cleaners endorsed by or affiliated with Ford Motor Company?).

A sporting goods store radio ad:

Boy Scouts of America

For firearms in which it states that while it is not telling listeners to buy a gun, it is advising them to heed the Boys Scouts motto and “Be Prepared.”

Has trademark registrations for “Be Prepared” for use in connection with various goods and services.

Legal risks: Trademark infringement (same trademark) and implied endorsement (is this store or its firearms endorsed by or affiliated with Boy Scouts of America?).

An arts organization promoting an event: And Subway’s $5 footlong sandwich promotion
campaign and trademark:

Subway has trademark registrations for both “$5 Footlong” and “Subway” for use in connection with various foodstuffs and restaurant services.

Legal risks: Trademark infringement (same trademark), copyright infringement (same graphics), trade dress infringement and implied endorsement (is this organization or event endorsed by or affiliated with Subway?).

The point? Create a brand identity unique to your company. You’ll not only eliminate legal risk, but also distinguish yourself in the marketplace.


© 2012 BL Speer & Associates

Who’s Afraid of LegalZoom? 

Posted by BL Speer & Associates Monday, June 18, 2012 11:00:00 PM

by Brenda Speer

This post first appeared on the SOLOinCOLO blog,
an online community of Colorado solo and small firm attorneys.

Not this small law firm. A recent blog post titled “LegalZoom’s War on GPs and Solos” by Larry Bodine on his LawMarketing Blog commented on LegalZoom’s IPO filing. Larry stated that LegalZoom “is capitalizing on consumers’ willingness to buy cheap, do-it-yourself forms as opposed to paying a lawyer to do the job right in the first place.” (Emphasis mine.)

We couldn’t agree more. Based on results we’ve seen obtained by clients who’ve used LegalZoom, they’re no better than do-it-yourself. And we know why—the key ingredient missing in the legal document services (per its satisfaction guarantee) provided by LegalZoom is the attorney-client relationship, in particular, the latter half of the phrase attorney and counselor at law. As we’ve noted on our blog, do-it-yourself legal is perilous whether done unaided or with the aid of LegalZoom.

Clients hire attorneys because they need help with a legal matter and they select someone they trust. The same reasons any of us hire a professional to serve us, be it an accountant, plumber or hair stylist. (I am extremely particular about my stylist and have been a loyal client of mine for 17+ years.) For example, as attorneys, our firm can form an entity for a client, just like LegalZoom. But unlike LegalZoom, as our client’s counselor, weI also can discuss the particulars of his or her situation and provide them legal counsel and guidance in determining which entity structure is best.

LegalZoom’s model relies on the client to somehow innately possess the legal knowledge to know which entity structure is best and what needs to be done, then acts as a mere scrivener. If the client already knows what needs to be done and how, then why do they need LegalZoom, or an attorney for that matter? We say clients need attorneys precisely because they don’t know what needs to be done and they want counsel.

As its Disclaimer makes clear, with LegalZoom there is not only no counselor-at-law component, but also there is no attorney-client relationship with its attendant benefits. The Disclaimer states in part (emphasis and embedded comments mine):

“The information provided in this site is not legal advice (We suspect their users think it is.), but general information on legal issues commonly encountered. LegalZoom is not a law firm and is not a substitute for an attorney or law firm (Okay, so no legal advice and no attorneys; then how is this legal service?). Communications between you and LegalZoom are protected by our Privacy Policy, but are not protected by the attorney-client privilege or work product doctrine (The lack of privilege should be extremely disconcerting to any legal consumer.). LegalZoom cannot provide legal advice and can only provide self-help services at your specific direction (Oh, we get it, the users supposedly know what they’re doing.); LegalZoom cannot provide any kind of advice, explanation, opinion, or recommendation to a consumer about possible legal rights, remedies, defenses, options, selection of forms or strategies (So what exactly does it do?). […] LegalZoom.com, Inc. is a registered and bonded legal document assistant.” (We wonder, does the user even read the Disclaimer or grasp its meaning and the potential adverse impact on their legal rights?)

Solos and small firms can learn a valuable marketing lesson from LegalZoom though. Don’t underestimate the competition, as LegalZoom apparently has per these gems on page 62 of its IPO (LegalZoom’s disparaging remarks notwithstanding, it has seen the enemy and we are them: trustworthy, competent, independent legal professionals.):

“When in need of legal help, small businesses and consumers lack an efficient and reliable way to find high quality, trustworthy attorneys. [...] Attorneys are frequently unable to predict the time required to address a client's legal matter, sometimes billing thousands of dollars to research a legal issue they have not previously encountered. This can be particularly true of generalist attorneys that offer many disparate legal services to members of their local communities. Unlike attorneys at large global law firms or specialty boutiques who handle high volumes of similar matters and develop expertise in specific domains, generalists can find it difficult to efficiently address a client's particular legal issue due to their lack of specialized expertise.”

So, no, we’re not worried that LegalZoom’s IPO will be the death-knell for either our law firm or any other solos and small firms. It may even be a boon, as we’ve experienced. First, the client messes things up by using LegalZoom’s do-it-yourself legal document services and then they hire us to fix it. Voila! Double the dollars unnecessarily spent in the legal marketplace by consumers. Which begs the rhetorical question: what service does LegalZoom confer upon consumers?


© 2012 BL Speer & Associates

Make It Easy to Keep Your Entity Compliant 

Posted by BL Speer & Associates Friday, June 15, 2012 8:00:00 PM

by Brenda Speer

Here in Colorado, every entity (corporation, limited liability company or partnership) has to file an annual report in order to keep the entity in good standing with the Secretary of State. Keeping your entity in good standing is good for it offensively—entitling it to bring and maintain lawsuits—and defensively—refuting an attempt by another to have the corporate veil pierced and the individual principals behind it held personally liable. Likewise, a sole proprietor operating under a trade name needs to renew the trade name every year.

The annual renewal anniversary for an entity or sole proprietor trade name occurs in the month it was made of record (either as a newly formed domestic entity or a registered foreign entity) with the Secretary of State. If you need a reminder to attend to this task, then the Colorado Secretary of State makes it easy for you. Enroll for email reminders. It’s easy.

We strongly recommend that you sign yourself up for email notification from the Secretary of State for any changes in the status of your company. Any time documents are e-filed, or your annual report is due, you’ll receive an email from the Secretary of State notifying you that a change has occurred. You can then go to the Secretary of State website to review the change made to your company record.

Here’s how to sign up for email notification or to look up your company records:

1. Go to the web site at www.sos.state.co.us, select “Business Organizations” from the navigation menu.

2. Next, select “Search” from the navigation menu.

3. On the next page you can search for your company records one of two ways:

a. In the search box field for “Business Name, Trademark, Trade Name”, type in your company name and click the “Search” button. On the next page(s) generated, look for and select the appropriate ID number (a hyperlink) for your company (this is the identifying number assigned to your company by the Secretary of State); or

b. You can go directly to your business records by entering your company ID number in the “ID Number” search box field and click the “Search” button. You can find your company ID number either as outlined in paragraph (a) above, or by reference to your filed Articles or other organizational documentation. The ID Number will be in the top right corner of the first page.

4. On the next page with the “Summary” of your company information, select “Subscribe to E-mail Notification Regarding this Record” at the very bottom of the page; then on the next page, enter your email address in the “E-mail Address” field and click “Subscribe”.

6. You will get an email confirming that you are subscribed.

Any further changes to your company records will auto-generate an email notification to you so that you easily can stay on top of things.

Another handy option offered by the Colorado Secretary of State is that you can secure your business filings. You can enroll for this option and then only authorized persons who have your login information can make changes to your entity information. It’s easy to do that, too. Follow the steps above, however, at step 4 above, do this instead:

4. On the next page with the “Summary” of your company information, select “Set Up Secure Business Filing for this Record” at the very bottom of the page; then on the next page, click on “Request a PIN”.

5. You will get a postal mailing with your PIN sent to the registered address of the entity.

Once you receive the PIN, go back the Secretary of State site and go to the “Summary” of your entity record. From there, again select “Set Up Secure Business Filing for This Record”.

6. Enter your PIN and then click on "Continue".

7. Enter the required account information and click on "Submit".

8. You will see a confirmation page indicating that your Secure Business Filing account was created.

That’s all there is to it! You are now equipped to maintain your entity records.

If you have an entity formed in another state, then check out what options are available to you in that state. Most other Secretary of State sites have implemented similar procedures, so take advantage of them!

Of course, if you don't want to hassle with all this, we're happy to provide that legal service for you.


© 2012 BL Speer & Associates

A Corporation Primer 

Posted by BL Speer & Associates Friday, June 1, 2012 7:00:00 PM

by Brenda Speer

During my legal career I have formed numerous corporations for clients and I have served on many corporate boards. I realized recently that while my understanding of a corporation is second nature, the corporate structure is shrouded in mystery for most. As I was reciting the litany just the other day to a client, it occurred to me that although corporate basics are mundane to me, they obviously aren’t for others. Now your corporate curiosity can be sated, at least in part, with this blog post.

Let’s start at the very beginning with a definition from Black’s Law Dictionary:

cor·por·a·tion n an artificial person or legal entity created by or under the authority of the laws of a state or nation, composed, in some rare instances, of a single person and his successors, being the incumbents of a particular office, but ordinarily consisting of an association of numerous individuals. Such entity subsists as a body politic under a special denomination, which is regarded in law as having a personality and existence distinct from that of its several members, and which is, by the same authority, vested with the capacity of continuous succession, irrespective of changes in its membership, either in perpetuity or for a limited term of years, and of acting as a unit or single individual in matters relating to the common purpose of the association, within the scope of the powers and authorities conferred upon such bodies by law.

After reading that you may be wondering, What’s an artificial person? It is a legal construct that means although a corporation is not a flesh-and-blood natural person, such as us human beings, a corporation is recognized as an entity with its own existence separate and apart from the human beings that created the corporation. As a result, corporations can endure for forever, theoretically, and many have for decades and centuries.

If you like alliteration and mnemonics, you can keep the basic corporate concepts straight with the 5 Bs: Birth, Babysitting, Bucks, Brains and Brawn.

A corporate entity is formed by filing Articles of Incorporation with the applicable legal authority, typically the Secretary of State, of the state in which the corporation is incorporated. The Articles of Incorporation serve as the charter establishing the entity. Articles provide the birth, or creation, of the corporation.

After the corporation is formed, the Bylaws are adopted. Bylaws are the governance rules adopted by the corporation for the management and regulation of its internal affairs. The Bylaws provide for, among other things, the election of directors by the shareholders and the appointment of officers by the directors. Bylaws provide the babysitting, or governance, of the corporation.

Shareholders are the owners of shares of stock in the corporation. Shareholders are empowered to elect the Board of Directors and are entitled to dividends, their pro rata share of profit distribution, if any, from the corporation. Shareholders do not have power or authority to participate in the management of or to bind the corporation. Shareholders provide the bucks, or capital, of the corporation.

 

Directors are authorized to manage and direct the affairs of a corporation. They provide guidance, advice and oversight to the corporate operations. The Directors are empowered to determine and vote on the course of actions to be taken by the corporation and to appoint the Officers. Directors provide the brains, or strategy, of the corporation.

 

Officers are empowered to execute the operations of the corporation in a daily, hands-on management role. While Officers do have power to act on behalf of and bind the corporation, such as signing contracts, purchasing property and bringing and defending legal actions, they do not determine or vote on the course of actions to be taken by the corporation. Officers provide the brawn, or action, of the corporation.

 

Now you know the basics of corporate structure.
A few more tidbits and you’ll be dangerously knowledgeable enough to engage in boring, cocktail party chit-chat.

 

A corporation is a corporation, regardless of sub-type, and they are all set up and governed as outlined above.

However, a for-profit corporation type is a capitalist enterprise and has shareholders and distributes profits, if any, to the shareholders as a return on their investment in the corporation.

In contrast, a non-profit corporation type is a charitable enterprise (which may or may not make money, notwithstanding the nomenclature) and has members, instead of shareholders, and it does not distribute profits to the members, but rather the profits are retained in the organization to further its charitable purpose.

Depending on the purpose, served membership or constituency, Articles of Incorporation and Bylaws of the non-profit corporation, the members may or may not be empowered to elect directors. For example, in a non-profit corporation whose served members or constituents are minors (such as youth groups for life skills, music or sports), the members are typically non-voting and that power is taken on by the adult directors. Members, like shareholders, may provide bucks, such as dues or contributions to the corporation.

An S corporation or a C corporation sub-type is a tax status of a for-profit corporation with the Internal Revenue Service.

In an S corporation (which may apply to a for-profit corporation that meets certain qualifications, such as fewer than 100 shareholders), the corporate income, losses, deductions and credit are passed through to the shareholders and are assessed tax at the shareholders’ individual income tax rates. This allows S corporations to avoid double taxation on the corporate income.

In a C corporation (which applies to a for-profit corporation that does not qualify as an S corporation), the profit of a corporation is taxed to the corporation when earned, and then is taxed to the shareholders when distributed as dividends. This creates a double tax. The corporation does not get a tax deduction when it distributes dividends to shareholders. Shareholders cannot deduct any loss of the corporation.

In a 501 corporation (which may apply to a non-profit corporation that meets certain qualifications, and there are many variations of 501 status), the organization may be exempt from federal income taxation and in addition, charitable contributions made to some 501 organizations by individuals and corporations may be deductible.


© 2012 BL Speer & Associates

The Perils of DIY Legal 

Posted by BL Speer & Associates Saturday, May 5, 2012 3:30:00 PM

by Brenda Speer

I appreciate economy and trying to save oneself some money. That’s what DIY (do-it-yourself) is all about. If you have the time and talent (or the time and desire to acquire the talent) to perform a task yourself, then kudos to you. If you don’t have the time, talent or desire, then delegate to and pay someone knowledgeable to do it for you. For a legal task, that means hire an attorney.

My 23+ years of experience as an attorney has taught me at least one thing: If you are not a licensed attorney, don’t try to do your own legal work. Yes, I know that you can represent yourself, but it’s highly unadvisable absent a significant educational undertaking. I have yet to encounter a self-representative DIY legal amateur who took even a modicum of time to educate himself about the legal task he attempted to do—as was reflected in the unfortunate results.

Even we attorneys don’t do our own legal work if it is out of our realm of expertise. For example, I hired an attorney to prepare wills for me and my husband, because this is not an area of law that I practice. Per the adage: He who represents himself has a fool for a client.

Those who undertake DIY Legal do themselves a disservice. First, they do not do the work correctly and create legal perils for themselves. Second, they spend more money and time than they would have spent had they hired an attorney in the first place, because they have to pay the attorney both to unravel their mess and then to redo it properly.

DIY Legal can be deceptively seductive. For instance, the DIY-er sees a form is involved for a particular legal task and thinks, “How hard can it be? All you have to do is fill out a form.”  Well, the first deception is that knowledge is required as to what information goes in the form. The second deception is that a form is often only a small part of what is required of an overall process.

A common example frequently encountered by our firm: DIY formation of a legal entity such as a limited liability company (LLC) or corporation. The DIY-er thinks all that is needed to create an LLC in Colorado is to file the Articles of Organization form with the Secretary of State. Wrong—there’s additional documentation that is needed beyond what is filed with the Secretary of State. As an example of the DIY-er not knowing what information goes in the form, the Articles of Organization have a check-the-box option for either (a) a manager-managed LLC, or (b) a member-managed LLC. Does the DIY-er know what are the differences and legal ramifications between these two modes of operation of an LLC? I say no, because I have yet to meet a legal DIY-er who can answer that question.

Another pitfall into which entity formation DIY-ers tumble: They think that because their entity name is on file that they also have trademark protection in place. Wrong again. DIY-ers learn this the hard way when they want to stop someone else from using their mark and find out that their legal protection is weak at best.

Speaking of trademarks, attempting to prosecute their own federal trademark registration application is another minefield for DIY-ers. DIY-ers don’t know that there are strict timelines involved in prosecuting a trademark application. As a result, they fail to respond timely and consequently their trademark application is abandoned. The abandonment cannot be fixed and the filing fee paid for the application is nonrefundable. The DIY-er has to start over and pay another filing fee for a new application.

Another fallacy of DIY-ers is that they can prepare their own contract. What they create is usually a cut-and-paste bastardization of documents found on their computer from other unrelated deals or on the internet (which is another legal peril). Again, unless the DIY-er knows what his hodge-podge verbiage means from a legal perspective, then he has just set himself up for a legal dispute, because he has no idea what obligations he and the other party did or did not undertake.

Also, it is erroneous for a DIY-er to think that he’s saving money or helping his attorney out by preparing his own contract. What the attorney needs to know are the business terms agreed to between the parties and the attorney can most efficiently prepare an agreement from that information. An attorney having to edit and rewrite a cobbled mess is much more inefficient and costly.

THE MORAL of all my examples is:

HIRE A QUALIFIED ATTORNEY with relevant legal experience to do your legal work! I don’t do criminal defense work and I jokingly, but earnestly, tell my clients to never waste their quarter calling me from jail. I don’t have the requisite criminal legal experience and knowledge to help them. However, I am happy to assist my clients with legal work within my realm of expertise, or to help them find a qualified attorney for matters outside my field.

 


© 2012 BL Speer & Associates

To Pierce or Not to Pierce-The Corporate Veil That Is 

Posted by BL Speer & Associates Thursday, March 29, 2012 4:01:00 PM

by Danette L.R. Lilja

Nope, I am not talking about body parts, although piercing the corporate veil will also leave a mark. When I say piercing, I mean losing the legal protection you thought was in place when you set up your corporation or limited liability entity. Ouch – now that smarts.

Actually, it is more accurate to say, “now that dumbs.” It “dumbs” because losing the protection of the corporate veil is always the result of “dumb” decision making (or more PC – less than smart decision making) on the business owner’s, shareholder’s, director’s, officer’s (your) behalf. Let’s see if any of the following sounds familiar.

1. Forming a corporate or limited liability entity in Colorado is relatively simple, right? I mean come on; all you have to do is go to your CPA (unauthorized practice of the law) or banker (unauthorized practice of the law). Or better yet, do it yourself online (no comment). Really? Do you go to the dentist for a yearly glaucoma test? Or, perform your own annual exam?

2. Registering with the Colorado Secretary of State is the legal equivalent of forming a corporation or limited liability entity. Ummm…nope. The Colorado Secretary of State maintains a repository of documents. The documents required by statute to operate a legal entity in the state are meant to put creditors, third-parties, and the general public on notice; tell the world what you are doing, so they can make an informed decision about working with you. Filing is only the first step. Got the rest of your standard agreements and legally required documents in place? Keeping annual minutes? Keeping adequate business records? Adhering to record retention requirements?

3. Initial contributions, also known as capital contributions, are meager. How many legitimate businesses start with a couple hundred dollars in capital? Better yet, how many corporations issue penny stocks? I mean on purpose? Legitimate business entities are adequately funded from the start; otherwise, it is a hobby.

4. Let me get the check – the company is buying. Audits aren’t just for the IRS anymore. Opposing counsel will request a copy of your financial records and accounts to see how you’ve been spending the coffers. Commingling funds? Using corporate assets and moneys for non-corporate purposes? Writing off a few vacations?

Alrighty, time to wind it up – I am over my word count limit. But know that I have only covered five (I combined two factors in number 4) of the eight factors in the first part of a three-part test that Colorado courts consider when determining whether a legal entity should be set aside and personal assets attached. That is legalese for losing your home, retirement, etc. Here’s my (not sanctioned by anyone) common-sense test to determine if you are at risk: does your entity look, small, taste, sound, and feel like a business? If not, see a competent attorney sooner rather than later.

We can help you best before an issue arises, rather than after. It is much, much, much less expensive and time consuming to stay out of trouble then get out of trouble. It’s called preventative law, and we highly recommend it.


© 2012 BL Speer & Associates

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