Archive for July, 2007

California Business Entities: How Long Does It Take To Get Approved

Tuesday, July 31st, 2007

You’ve done your research and have decided on a business entity. You’re chomping at the bit to open a bank account and get moving. You file your corporation or LLC with the Secretary of State and wait and wait and wait. Just how long is this going to take?

California Filing Times

The California Secretary of State can be very slow when it comes to approving new business entities. Once you file the entity, you can sit around tapping your fingers for as long as two months. After two months, you may not even remember why you filed the darn thing! Can you avoid this time and momentum killer? YES!

The California Secretary of State offers “rush filing” options for forming business entities. The first is a 24 hour rush that ads $500 to the filing process, an expense that should really only be undertaken if you are desperate. The second option runs a whopping $15 and has a turn around time of 7 to 10 business days. Ah, so this is the way to do it, right? Nah, that would be far too easy!

For rush filings, the Secretary of State requires all filings to be made in person. If you are not located in Sacramento, this can cause a major problem. So, what do you do?

If you are creating a corporation, you can file the articles of incorporation at a branch office of the Secretary of State. Most major cities have a branch, but you can pop on to the web site for the Secretary of State and find your local branch.

If you are forming an LLC, California makes things difficult. For no logical reason, the Secretary of State doesn’t allow LLC filings to be made at branch offices. This policy makes absolutely no sense, but what are you going to do? You are going to beat the state at its own game.

Rush LLC filings must be personally filed in the Sacramento office of the Secretary of State. The policy doesn’t say WHO must personally file it. Using this loophole, you can hire an attorney delivery service in Sacramento to file and pick up the Articles of Organization for your LLC. You simply send them the articles as well as the filing and rush filing fees. You can expect to pay the attorney service an additional $50 to $75 for the service.

California is one of the worst states to do business in. The Secretary of State does everything possible to make filings a pain in the With this information, you can turn the tables and beat them at their own game.

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California Financial Privacy Law Partially Invalidated

Monday, July 30th, 2007

by  Richard Chapo, Esq., Staff Writer

The 9th Circuit Federal Court of Appeals has dealt a blow to privacy advocates by invalidating a California privacy law. In litigation brought by the American Bankers Association and others, the appellate court overruled the finding of a trial judge that the California law could stand. Instead, the appellate justices found the law to be pre-empted in part by the federal 2003 Fair and Accurate Credit Transactions Act.

When a state law conflicts with a federal one, the federal law takes precedent. For instance, the Supreme Court has ruled abortion to be constitutionally protected. No state may pass anti-abortion laws and have them enforced.

The question at issue in the California law was a section giving California residents the right to block financial institutions from selling their private information to third parties.

A San Francisco trial judge, Morrison C. England, Jr., had ruled the section conflicted with provisions of the Fair and Accurate Credit Transactions Act, but was not pre-empted because the federal law allowed for stricter state laws. The 9th Circuit court disagreed.

The case will be returned to Judge Morrison in the next 60 days. He will then determine whether any other provisions dealing with the sale of personal financial information are still enforceable. Given the appellate ruling, it is difficult to imagine a ruling upholding this section of the California law.

Notwithstanding these developments, approximately seventy percent of the California privacy law is still enforceable. Financial institution still must get permission from customers prior to selling or sharing your information with third parties.

You should be concerned about financial institutions selling your private information to others. With all the incidents of identity theft in the news, chances are you will eventually become a target. Banks should be focusing on protecting their customers, not making a buck off private information.

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How To Give Notice of Copyright On Your Works

Monday, July 30th, 2007

by Richard Chapo, Esq., Staff Writer

The use of a copyright notice is no longer required under U. S. law, but you should still give notice whenever possible. Because prior law did contain such a requirement, however, the use of notice is still relevant to the copyright status of older works.

Under the 1976 Copyright Act, creators of covered works were required to give notice of copyright on the work in question. This requirement was eliminated when the United States signed onto the Berne Convention in March 1989.

You should give notice of copyright whenever possible because it puts the public on notice that the work is protected by copyright, identifies the copyright owner, and shows the year of first publication. Furthermore, in the event that a work is infringed, if a proper notice of copyright appears on the published copy or copies to which a defendant in a copyright infringement suit had access, then the defendant can’t claim innocent infringement as a defense. Innocent infringement occurs when the infringer did not realize that the work was protected.

The use of the copyright notice is the responsibility of the copyright owner and does not require advance permission from, or registration with, the Copyright Office.

Form of Notice for Visually Perceptible Copies

The notice for visually perceptible copies should contain all the following three elements:

1. The symbol © (the letter C in a circle), or the word “Copyright”;

2. The year of first publication of the work. The year date may be omitted where a pictorial, graphic, or sculptural work, with accompanying textual matter, if any, is reproduced in or on greeting cards, postcards, stationery, jewelry, dolls, toys, or any useful article; and

3. The name of the owner of copyright in the work, or an abbreviation by which the name can be recognized.

Here’s an example: © 2002 Jane Doe

Position of Notice

The copyright notice should be affixed to copies in such a way as to “give reasonable notice of the claim of copyright.” The three elements of the notice should ordinarily appear together on the copies or container.

In Closing

You work hard to create books, articles, music and other items. Make sure you protect them by giving copyright notice.

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Anti-Phishing Bill Introduced To Congress

Monday, July 30th, 2007

Sen. Partick J. Leahy has introduced the Anti-Phishing Act
of 2005 to Congress for consideration. The Act would allow
federal prosecutors to seek fines of up to $250,000 and
prison sentences of up to five years against individuals
convicted for promoting phishing scams. Online parody and
political speech sites would be excluded from prosecution.

“Phishing” is an online scam used to deceive computer users
into giving up personal information such as social security
numbers and passwords. Phishing scams usually involve email
messages requesting the verification of personal information
from a familiar business. Readers are provided a link that
sends them to what appears to be the site of the company in
question. The reader is then asked to verify their account
information by providing their name, address, social
security number, account number, etc.

In truth, the site is an illegal copy of the business in
question and the reader’s information is collected for later
fraudulent use including identity theft. Consumers are
estimated to lose hundreds of millions of dollars a year to
phishing scams. Undoubtedly, you have received more than a
few of these emails.

Phishing emails are most likely to use the sites of banks,
credit card companies, and large retailers. Online companies
such as Ebay, PayPal and Earthlink have had similar
problems. One particularly aggressive group even scammed the
site of the IRS.

In April 2004, the IRS warned consumers that scam artists
were sending emails purportedly from the IRS. Consumers
received emails claiming they were under investigation for
tax fraud and subject to prosecution. The emails contained
language telling recipients they could “help” the
investigation by providing “real” information and directed
them to a website that was derivative of the IRS site.
Consumers were then asked to provide detailed personal
information to dispute the charge. Since most people fear
the IRS, one can assume that a large number of people took
the phishing bait.


The Anti-Phishing Act of 2005 is a nice start to combating
scam artists that use phishing to pilfer money from
consumers. The Act, however, will not put an end to
deceptive phishing practices if it is passed. There reason
involves jurisdictional issues.

A large percentage of the individuals promoting phishing
scams reside outside of the United States. While they may
take notice of the law, it will have no discernible effect
on their fraudulent scams. Until there is an international
response, phishing scams will continue to be a problem.
Nonetheless, Senator Leahy should be commended for
initiating efforts to deal with this growing problem.

Richard Chapo is the lead attorney for the law firm – a firm providing
legal advice to California businesses. This article is for
general education purposes and does not address every facet
of the subject matter. Nothing in this article creates an
attorney-client relationship.

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Supreme Court Decides Against Grokster In File Sharing Decision

Monday, July 30th, 2007

The U.S. Supreme Court has ruled peer-to-peer sites such as Grokster, Kazaa and Morpheus can be held responsible for copyright infringement by their users. In a rare 9-0 decision in favor of Plaintiff MGM, the Justices held that a business distributing technology with the active intent of promoting copyright violations could not escape liability for subsequent copyright infringements. Although unanimous, the ruling is a strained effort to isolate file sharing from other industries.

In arguing their position, Grokster had relied on previous rulings regarding VHS technology. In a 1984 case, the Supreme Court ruled the makers of VHS recorders could not be held liable for copyright piracy by users of the machines. The Court specifically ruled that VHS and any other technology with “substantially non-infringing uses” could not be held responsible if individuals illegally taped movies or shows off of television. Indeed, lower courts had ruled in favor of Grokster using the VHS ruling as precedent. So, what’s the difference between the two technologies?

In a somewhat tortured reasoning, the Justices distinguished the two cases by focusing on the “intent” of the companies. If a company distributes a technology with the intent that it be used by third parties for copyright infringement, then it is responsible. “Intent” is shown by a company making a “clear expression” of such intent or taking affirmative steps in said direction.

Writing the opinion, Justice Souter explained:

“There is no evidence that Grokstermade an effort to filter copyrighted material from users’ downloads or otherwise impede the sharing of copyrighted files,”

He further explained,

“The company showed itself to be aiming to satisfy a known source of demand for copyright infringement, the market comprising former Napster users.”

No Nail In The Coffin

The entertainment industry is trumpeting the end of file sharing. This ruling is no such thing. To understand the impact of the ruling, a brief discussion of legal procedure is necessary.

The Supreme Court decision does not find Grokster liable for anything. Instead, it simply reverses a lower court ruling that Grokster could not possibly be found liable. As a result, the case will return to the trial court and eventually go to trial. In the trial, the Plaintiff will have to prove that Grokster distributed file-sharing software with the intent that it be used for copyright infringement. Proving such a case will not be easy since “intent” is a vague concept.

In Closing

The decision of the Supreme Court provides the entertainment industry with a basis for pursuing file sharing companies. Is file sharing at an end? Not likely.

Richard Chapo, Esq., is a business lawyer with – offering legal advice to San Diego businesses. This article is for general education purposes and does not address every facet of the subject matter. Nothing in this article creates an attorney-client relationship.

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Beware of Professional Parasites

Monday, July 30th, 2007

What is a professional parasite? It is someone who produces nothing, but rather collects fees without helping in the growth, profit or efficiency of an organization or business. We can classify such folks with titles of Lawyers, accountants etc. in this group of professional parasites, as they cause huge over all costs, which are passed onto the consumers thus affecting quality of life and standard of living. Every time someone says that they are “a professional” you should immediately scrutinize their actual work activity.

Additionally someone who; files forms, collects forms or demands forms from you generally has professional as part of their title. But how can someone who deals in a “Four Letter Word” like form, be anything but full of crap? Apparently Jesus did not live long enough to address this evil of the form. Forms are the weapon of the evil bureaucracy and push back mankind’s forward progression. If you want to achieve more in your company, nation or personal lives you need to beware of the podium pusher politicians who are generally lawyers who go around promoting their agenda, organizing and maneuvering using this four letter weapon.

The only real evils in the present period are the forms, form makers and bureaucratic groups who propose them. These folks are friend of no free man, they are professional parasites and you are well advised to beware. Think on this.

“Lance Winslow” – If you have innovative thoughts and unique perspectives, come think with Lance;

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Resolve Disputes With Your Partners Before They Happen

Monday, July 30th, 2007

A majority of businesses have ownership groups of less than
five individuals. While this provides for efficient and
effective management, difficulties arise when something
happens to one of the owners.

If your business has multiple owners, ask yourself what
happens if:

? The owners can’t get along?

? One of you is hospitalized for an extended period?

? An owner gets divorced [and the spouse is awarded half the

? An owner stops coming to work?

? You want to sell stock to a third party?

? An owner passes away?

? One of you wants to retire?

Each of these events can severely disrupt your business,
particularly ownership disputes. If the owners can’t agree
to a course of action, they often end up in court and a
judge may get involved in the actual running of the
business. Many businesses that were otherwise successful
have failed because of such disputes.

How can you avoid these problems?

The best solution is to pursue an agreement between the
parties before there are problems. This agreement, sometimes
called a buy-sell agreement, is a contract between the
owners [and their spouses, if any]. The purpose of the
document is to address how disputes, ownership sales and
other events will be addressed before they happen. These
issues are much easier to deal when emotions are not

The most common issues addressed in the ownership agreement
are when and how equity interest will be bought back by the
business or other owners. Common topics include:

? First Right of Refusal if a shareholder tries to sell
their stock;

? Right of owners to buy the stock from the estate of a
deceased owner to avoid ownership by the children or spouse
of the deceased owner. This is often combined with life
insurance products to supply a means for making payment;

? Right to buy back stock from an owner that files personal

? Right to buy back stock from an owner that is found to be
mentally incompetent [drug addictions, etc.];

? Right to buy back stock from an owner that fails to
perform their assigned duties; and

A buy-sell agreement is a smart and effective means of
short-circuiting ownership disputes before they occur. If
your corporation consists of two or more owners, you should
seriously consider putting an agreement in writing to avoid
debilitating disputes.

Richard Chapo is the lead attorney for the law firm – a firm providing
legal advice to California businesses. This article is for
general education purposes and does not address every facet
of the subject matter. Nothing in this article creates an
attorney-client relationship.

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