Employment Law in a Social Networking, New Media World

I am quoted in a FOXBusiness small business article on how employers can protect their intellectual property rights in a Facebook/Twitter social networking world:

In an age of way-too-much information and widespread social-networking addiction, businesses are finding it increasingly difficult to protect trade secrets and practices. It’s important to know your rights as an employer and/or as an employee.

If you are neither of the above at the moment, and are instead on the job hunt, you should keep in mind that potential employers have the right to (and will) research your online living activities. In one quick Google search, what might a recruiter learn about you? It’s important to always keep your professional goals in mind when posting personal details on sites that are publicly accessible.

If you pass the test and find yourself employed, you’ll then have to follow company policy regarding Internet activities. Because privacy is often a top concern for employer and employee, companies are adjusting to the new online environment and adopting rules and regulations accordingly to ensure protection.

Anita Campbell, founder and CEO of Smallbiztrends.com, said there’s a major difference between large corporations and small businesses when it comes to social media sites. Large corporations are more likely to block all social media sites, such as Facebook and Twitter, from being accessed on the company network.

However, she said most small businesses do not block these sites at work and, in some cases, require employees to participate in them for company benefits. Jonas M. Grant, a business attorney and expert, said some employers rightfully worry about the disclosure of confidential company information by employees who are either posting on Web sites under their own names or anonymously. But he said employers do have the right to legally prohibit certain social-networking activities involving the business to avoid a slip of an idea or secret.

According to Campbell, small businesses using social media networks can have advantages and disadvantages. Recommending your employees take full advantage of the power of social media for “free” marketing is a definite plus. But allowing employees to have access to social media all day can deter them from actually working, decreasing productivity.

“But the stickier issue is one of inappropriate communications by employees,” Campbell said.

Grant recommends companies have an employee manual and training program in place specifying acceptable workplace use of the Internet in general. He said employers should expressly tell their employees what they can and cannot talk about, especially in an age with constant Internet communication.
“Employers are also wise to have employees sign employee loyalty and confidentiality agreements at the time of hire,” Grant said.

Experts agree that prevention is key for small businesses, and preparing for “what-ifs” is the best protection. Grant said communicating concerns with employees, outlining company rules and restrictions, while implementing appropriate policies and agreements in conjunction with employment law counsel, is the best method of prevention.

What Rights Do Employers, Employees Have in Internet Age? by Hope Holland, FOXBusiness.com, October 22, 2009

Intellectual Property Protection in a Social Networking World

I am quoted in a FOXBusiness small business article on protecting intellectual property rights in a Facebook/Twitter social networking world:

Friend it, follow it or link to it. Brainstorming, would-be entrepreneurs around the world are continuously connecting through social networking sites such as Facebook, Twitter and LinkedIn. But, legal experts warn, users should beware of setting themselves up for Information-Highway robbery.

You can lock the doors on your home and your vehicle. You almost need to rent storage space to store your many login and passwords in today’s Internet age. But, what about your revolutionary ideas for starting your own company or launching a new product line? Do you have any rights when it comes to protecting things you carry in your head?

Yes, the experts say. And they advise that you take them seriously, especially your most basic right for protecting your literally un-touchable valuables.
Remember, you have the right to remain silent.

“If you post a business idea on Twitter, someone could beat you to the punch,” said Jonas M. Grant, a small business lawyer and entertainment intellectual property attorney. “If your idea is what makes your for-profit business special, you should consult with an attorney to see what, if any, protections are available and save the Tweeting for when the business has launched. By posting an idea to a social networking site, you have contributed it to the public domain.”

It seems like a simple concept, but choosing how to protect your ideas can be a difficult and confusing process. Do you need a copyright? A trademark? A patent? What are trade secrets? FOXBusiness.com asked the legal experts to translate the legal jargon regarding intellectual property rights.

Anita Campbell, founder and CEO of Smallbiztrends.com, an online resource for small businesses and entrepreneurs, said if your creation is a book, blog post, artwork, cartoon, software, podcast recording, video, or anything along these lines, than a copyright is right for you. A copyright protects original creative works and the “expression of an idea,” she said. You can simply register for copyright protection with the U.S. Copyright Office.

So, you weren’t born yesterday – and you know better than to Tweet about your idea or write about it on your Facebook page. But what about the people you are including on your launch team? Or, how about if you’d like to discuss your brainchild with any consultants or potential future business partners and/or clients? Can you trust them to keep it off their online world?

The experts say no. If you don’t protect yourself ahead of time, you could wake up to an e-mail announcing the successful launch of your long-time-planned dream company -- and have no legal means to get back what is rightfully yours.

With start-ups predominantly using the cross-globe-reaching Internet and social networking sites to get things moving, Grant said no small business is “too small” to invest in protecting company information. He said this is the reason to have anyone you share your grand plan with sign a non-disclosure agreement (NDA), also known as a confidentiality agreement, confidential disclosure agreement (CDA), proprietary information agreement (PIA), or secrecy agreement. He said to always protect your trade secrets or confidential business information to avoid losing an idea or strategy to another company.

In fact, Grant said small businesses should act like the largest companies in the world, and keep all future business plans secret until all available intellectual property protections are in place and it is time to launch to the public....

Protect Your Business Ideas From Information-Highway Robbery by Hope Holland, FOXBusiness.com, October 22, 2009

Michael Jackson's Estate and Estate Planning (press item)

Recently quoted in the press on Michael Jackson's estate, will/trust, and creditor and child custody issues:

Though Michael Jackson’s body isn't in the ground yet, speculation is running rampant as to what will happen to his financial assets. Many suspect that legions of those only tangentially connected to the pop star are already sharpening their knives for their shares of the possible profits.

"There are a lot of dark characters that are going to try to make a buck out of this because Michael Jackson, unfortunately, is such a polarizing figure and his name is greater than any individual’s name on earth," said Aphrodite Jones, author of "The Michael Jackson Conspiracy."

"That being the case, everyone and anyone during his life tried to make money any way they could, and I don’t think that will end because of his death," Jones explains. "You think about Elvis Presley and all of the people who have made livings as impersonators and the Graceland tours, etc. — that’s nothing compared to what we’re going to see here."

As far as legal entitlements, Jackson's assets are undercut by the $400 million in debt that the pop star left behind.

Jonas M. Grant, an entertainment lawyer in Burbank, Calif., explains. "In general, creditors get the first crack at the contents of a deceased’s estate," he said.

Entertainment lawyer Jonas M. Grant says the mother of two of Jackson's children, Debbie Rowe, will likely get custody of those children and their inheritance. "[She] will benefit financially indirectly even if she is not named as a direct beneficiary of his estate, which she also may well be."

Vultures set to profit off of Jackson’s death: Skeptics say those who exploited him in life ready to strike again, Heidi Patalano, Metro International, June 29, 2009

Update: When quoted for the above news article, I didn't have the benefit of reviewing Michael Jackson's purported last will, which can be seen below, and is a pour-over will, essentially directing that all of his property not already titled to the "Michael Jackson Family Trust" be added to that trust, for distribution to the beneficiaries named in that trust:


Michael Jackson's Will - full screen (new window)

Blog Post Cited in Orange County Register Article on Annual Minutes Mailings

This blog's most popular entry, posted in January 2007 but updated continually since, concerning misleading corporate and LLC annual minutes mailings was recently cited in a small business advice column in the Orange County Register:

Old scam reappears in O.C.:

Burbank attorney Jonas Grant gives a good explanation of the law on his California Business Law Blog, based on problems his clients reported to him in 2007. The post has gotten dozens of comments from people who received these solicitations, some from other states.

(One even accuses Grant of sending the letters, thus the red-letter disclaimer at the top of his post. Talk about shooting the messenger.)

By Jan Norman, March 29, 2009

California LLC Quotes in Today's Los Angeles Times:

LLCs provide key financial benefits:
The owners receive tax and liability advantages. Such registrations have risen, but the format is not for everyone.
Cyndia Zwahlen: Small Business Report
July 25, 2007

To be an LLC or not to be an LLC? That is the question for a growing number of small businesses.

Whether to adopt the relatively new limited liability company format or to set up under the more traditional form of a corporation, partnership or sole proprietorship is a key decision for a small-business owner.

"An LLC is an important option for small businesses," said Jonas M. Grant, a business attorney based in Burbank. Interest in the format is high, he said.

The benefits of an LLC seem almost too good to be true.

The owners, or members, have the personal liability protection that shareholders of a corporation do, with far less paperwork and fewer regulations.

That means — barring illegal, unethical or irresponsible activity — their personal assets are not on the line when it comes to covering the company's business debts or legal claims against it.

At the same time, the owners avoid the double taxation on profit to which shareholders in a regular corporation face.

Limited liability companies pass profits to the members, who pay taxes at their individual income rates, as in a legal partnership. In California, where this type of company has been legal since 1994, there are 409,619 limited liability companies, according to the secretary of state's office.

The number of companies registered under this format has jumped each year since 2000, when the state finally allowed limited liability companies to be set up by single-person businesses. More than 73,000 LLCs registered with the state last year, compared with about 31,000 in 2000, the secretary of state's office said.

That growth doesn't surprise LLC expert Anthony "Tony" Mancuso, a Berkeley attorney who wrote the new edition of "Nolo's Quick LLC: All You Need to Know About Limited Liability Companies" (Nolo, 2007). "It was obvious to me that LLCs would become the next big thing in business entities because of the combination of benefits," said Mancuso, who has written several books on limited liability companies and other corporate structures for Nolo, a self-help legal publishing house based in Berkeley.

The newest version of his "Quick LLC" book lays out the basic features of limited liability companies, explains important exceptions to owners' limited liability and compares the LLC with other business formats.

He also discusses converting an existing business to an LLC, as well as tax and management issues. And he devotes a chapter to the paperwork involved in setting up a limited liability company. There is also a sample operating agreement and a checklist to help you determine whether forming an LLC makes sense for your business.

Considerations include whether your type of business is one in which business debts and claims could threaten your personal assets. Another consideration is whether you have assets, such as equity in a house, that could be at risk without the protection of an LLC.

"Anyone a little bit nervous about the adequacy of their insurance coverage" could be a good candidate, Mancuso said.

Existing sole proprietorships or general partnerships and anyone thinking of forming an S corporation, an entity that generally pays no taxes, he writes, could benefit.

Those who aren't good candidates include existing regular corporations, also known as C corporations. And in California, some professionals such as lawyers and architects may not form an LLC.

If you want to raise money from venture capitalists or by selling stock, an LLC probably is not the business form you need.

Mancuso makes it clear that despite the potential benefits of an LLC, they have to be weighed against the cost, especially in California. Although it costs just $70 and takes a one-page form to set up a limited liability company in California, ongoing annual fees and taxes could cost more than 10 times that amount. There is a minimum annual tax of $800, payable to the state Franchise Tax Board.

And once gross receipts hit $250,000, additional annual fees kick in, which range from $900 to $11,790.

There have been several challenges to the constitutionality of the state's LLC fees, but the issue is still working its way through the courts.

Although Wyoming, in 1977, was the first state to authorize limited liability companies, it wasn't until 1997 when helpful new Internal Revenue Service rules kicked in that the format began to gather steam among business owners

Limited personal liability protection does not apply if you personally guarantee a business debt or bank loan for the company. Then your personal assets are on the line. That will probably happen more often when a company is young and has not yet established its credit history.

And as is the case with all other business entities, an owner can be held personally responsible for financial losses caused by their negligent or careless actions, Mancuso said.

Mancuso recommends three steps to safeguard the protection against personal liability offered by an LLC.

Act fairly and legally, including disclosing important facts or financial information to members or outsiders such as vendors.

Put enough money into the LLC to properly fund it. Otherwise, a court may not consider it a legitimate business and yank the personal liability protection.

Separate personal expenses from LLC expenses. Aside from making good business sense, that is another way to show that the company is legitimate, especially if you will be a single-member LLC.

The limited liability format isn't available or appropriate for some business entities. In addition to a number of professions, banks, insurance companies and other financial service firms are not usually candidates for a limited liability company.

Even if you qualify for an LLC, you may not need the protection. In his book, Mancuso gives an example of a freelance proofreader working from home as a business that may not need the extra protection from lawsuit claims and business debt.

And if you decide to end your California limited liability company, it must be formally dissolved. For more details, go to the California secretary of state website at http://www.sos.ca.gov/business/llc/llc_faq.htm or call its business programs division at (916) 657-5448.

Important tax information for California limited liability companies can be found in the Franchise Tax Board's Form 3556, available online at http://www.ftb.ca.gov . Just type "Form 3556" in the search box.

Armed with the facts, you can decide whether LLCs have real benefits or not.

"Sometimes I get a new client who tends to believe an LLC is manna from heaven," Grant said. Of course that's not always the case, although, he said, "it certainly has its place and should always be considered."

(C) 2007 Los Angeles Times

California Corporate Compliance Annual Minutes

READ THIS FIRST AND BEFORE TELEPHONING OR EMAILING: Neither this blog, nor its sponsor law office or attorney is connected in any way with the companies and services discussed below. Please take the time to carefully read the ENTIRE blog post and comments before telephoning the law office. This warning is being posted because numerous people have searched for a corporate minutes company's name or address, landed on this web page, and wrongly assumed that they have found the web site of that company. Thank you, and apologies for the ugly but effective red letters.

Note that this blog post, and many of my other blog posts are updated with new information on an ongoing basis; scroll to the bottom of this post for the most recent additions.

Some of my business incorporation and LLC formation clients report recently having received in the mail official-looking documents regarding their corporations from organizations such as Corporate Compliance Recorder, California Corporate Compliance Business Division, Minutes and Compliance Affairs, Compliance Annual Minutes Board, Corporate Headquarters, and the like.  These notices at first glance appear to require the filing of annual minutes or a shareholders and directors report with a government agency, along with the annual filing fee of $125-$150; a filing deadline is usually also listed.  These letters are by no means new, or limited to California, but appear to be ubiquitous at the present time for California corporations.

California Corporations Code sections 600, 1500, and 9510(a) are also sometimes cited:

Section 600 provides in pertinent part, "An annual meeting of shareholders shall be held for the election of directors on a date and at a time stated in or fixed in accordance with the bylaws."

Section 1500:  "Each corporation shall keep adequate and correct books and records of account and shall keep minutes of the proceedings of its shareholders, board and committees of the board and shall keep at its principal executive office, or at the office of its transfer agent or registrar, a record of its shareholders, giving the names and addresses of all shareholders and the number and class of shares held by each. Those minutes and other books and records shall be kept either in written form or in another form capable of being converted into clearly legible tangible form or in any combination of the foregoing. When minutes and other books and records are kept in a form capable of being converted into clearly legible paper form, the clearly legible paper form into which those minutes and other books and records are converted shall be admissible in evidence, and accepted for all other purposes, to the same extent as an original paper record of the same information would have been, provided that the paper form accurately portrays the record."

Section 9510(a) relates to record-keeping requirements for non-profit corporations.

What these services are offering is the preparation of corporate minutes.  Annual meeting minutes for California corporations should indeed be prepared, as the mailings suggest, but neither you nor these companies file such minutes with the Secretary of State (unlike the annual Statement of Information, which is filed - along with a $25 fee - with the Secretary of State) and these minutes are best prepared either by corporate officers/directors, if they know how to do so, or by a business attorney (who can also review the corporations's prior meeting minutes and bylaws for potential areas for improvement, changes, and the like).

Unfortunately, while the mailings usually contain fine print that indicate "this is not a government document" and that the fee and service offered is not mandatory, many have been confused or misled by the mailers, resulting in a negative review for one of these companies by the Los Angeles Better Business Bureau.

The senders of these letters offer to assist California corporations with something that they indeed should be doing, preparing and filing with the corporate records annual meeting minutes, but their fees are high in relation to the limited service offered, and their advertising methods are questionable.

10/2007 update: Latest mailings for my clients are most frequently coming from sender and return address Corporate Compliance Center, 2740 Fulton Ave., Ste. 203, Sacramento, CA 95821-5183; Corporation Compliance Recorder, Administrative Clerk Division, P.O. Box 66186, Los Angeles, California 90066; and California Corporate Services: Business Division, 3308 El Camino Ave., Suite 300-609, Sacramento, CA 95814, all with the additional legend, "THIS IS NOT A GOVERNMENT DOCUMENT", and Corporate Business Bureau, Corporate Business Division, 8939 S. Sepulveda Blvd., #110-727, Los Angeles, CA 90045.

12/2007 addition: Board of Business Compliance, Annual Minutes Division, P.O. Box 93069, Los Angeles, CA 90093-0069 ("Business mail - Important Notice Enclosed; This is Not A Government Document").

2/2008 addition: Compliance Services, P.O. Box 1265, Studio City, California 91614-0265.

7/2008: Some readers have asked what they can do to thank me for the information provided here. While always appreciated, no thanks is necessary. Of course, if you or your friends, relatives, or colleagues are in need of the legal services I offer, please let them know about me and my website, bookmark the site, and keep me in mind for your future legal services; having you or them as my next client is the best thanks I can receive. And if your California corporation is in need of actual customized and attorney-drafted corporate minutes or attorney assistance with ongoing maintenance of your business entity, those are services we offer.

Note that some or all of these addresses may be postal or private mail box (PMB) facilities, so that other businesses may share the same address(es), and that the opinions expressed in the comments below are those of their respective authors and in general do not identify a specific company.

September 2008 update: Complaints may be filed with the California Attorney General by mail, telephone, fax, Internet, or email, as follows:

Attorney General's Office
California Department of Justice
Attn: Public Inquiry Unit
P.O. Box 944255
Sacramento, CA 94244-2550

TELEPHONE: 1-800-952-5225 (Toll-free in CA) or (916) 322-3360

FAX: (916) 323-5341

WEBSITE: http://ag.ca.gov/consumers

EMAIL: piu@doj.ca.gov

=============================

I was quoted in a Santa Monica Daily Press newspaper article on this topic earlier this year:

While there is nothing inherently wrong with the service that the AMCB is allegedly offering, the deception of business owners lies in the marketing tactic, according to Jonas Grant, a Burbank attorney who has represented a client who filed a lawsuit against one of the suspect companies.

Corporations are required by law to keep a record of minutes from the annual meeting of shareholders when officers are elected. The problem with the form is it implies that the corporation is required to file the minutes, when it actually just needs to make sure it has one on record, Grant said.

Grant noted that one of his clients who paid the fee to the compliance board did receive back the meeting minutes, though it was written in an unprofessional manner, he said.

When receiving similar types of letters, one of the warning signs that businesses can watch out for is the price of the fee, which should never be more than $25, Grant said.

Business owners should also always keep an eye out for the fine print.

The tip off in the letter sent to the Westside Economic Collaborative was the fine print at the very bottom, which states that the product or service being offered is not endorsed by any government agency. The fine print also adds that the service is not a “statement of account due,” but rather a solicitation.

“If you look at the fine print, you’ll know for sure if it’s garbage,” Grant said. “If it’s over $25, it’s probably not the right thing.”

October 2008 update: California Corporate Documentation Services, 1146 North Central Avenue #443, Glendale, CA 91202, "BUSINESS MAIL - IMPORTANT NOTICE ENCLOSED, THIS IS NOT A GOVERNMENT DOCUMENT"; CCDSquestions@aol.com; operated by CALIFORNIA CORPORATE DOCUMENTATION SERVICES, INC. Sadly, a member of the State Bar of California, Romel Ambarchyan, whose address of record with the State Bar is the same as California Corporate Documentation Services, Inc.'s, appears to at the very least be acting as the agent for service of process for this company.

November 2008 update: Department of Business Minutes, 4470 W. Sunset Blvd., #380, Los Angeles, CA 90027 ("Business mail - important notice enclosed; this is not a government document").

February 2009 update: New Annual Review Board mailing targets LLCs with Statement of Information related letter, 333 S. Grand Ave., 25th Floor, Los Angeles, California 90071, 213-943-1320; requests $228 payment - the actual Secretary of State Statement of Information filing costs $20 and is filed every two years.

California's Secretary of State has issued a customer alert regarding what it terms "misleading solicitations".

March 2009 update: The U.S. Postal Service is interested in hearing from any consumers who have actually filed and paid for any of the above reference minutes services; if you have relevant information, please contact:

Mr. Mike McCarthy, Postal Inspector
U.S. Postal Service
281 E. Colorado Blvd.
Pasadena, CA 91101-9998
626-405-1359

April 2009 update: State Bureau of Corporations, Annual Minutes Filing for Corporations and LLCs, P.O. Box 5909, Sacramento, CA 95817.

June 2011 update: Annual Business Renewal Center (ARBC), LLC Filing and Renewal Department, P.O. Box 27265, Los Angeles, CA 90027. Charging $175 to file a $20 Statement of Information. A not particularly well chosen name considering that LLC Statements of Information are due biennially, rather than annually.