Law and the Maiden

I have been an attorney since 1983. I have learned some things of use since I began. One thing is that nothing is as simple as it seems. Another thing is that everything is a lot more simple than we think.

Today, I went to the Secretary of State's Office to file some documents fro a client. Normally, I would do this on-line or use a commercial filing service, but I was in St. Paul and I wanted to stretch my legs and have lunch with my brother. Sometimes, when I do this type of errand, I feel like a pastry chef who asks her assistant to step aside so she can get a feel for the dough again. I go to the SOS office. I get in line with everyone else. I listen and observe while people of all sorts step forward with their dreams of enterprise and hopes for betterment. It is a happy place, a hopeful place. What took place today did not detract from that, but it made me wonder whether, in addition to the volunteer legal services provided for marital and family matters, for criminal defense (which has just been criminally unfunded) and immigration, there should be free basic services for people like these hopeful souls, starting their own businesses.

The law is full of traditions like the fiction of the corporation. A corporate entity (from corpus, or body) can be a corporation, a limited liability company, a partnership or any one of many other forms of entity. The law says, this entity is not a person but we are going to treat it like a person and give it certain rights, such as the right to exist, the right to incur debt, to sue and be sued, and so forth. The reason for this? To stimulate the kinds of activities that these entities engage in, for profit and not for profit, all of which benefit the larger society as a whole. The law says that what the entity does may not be ascribed to those who form the entity or who invest in it. They are protected from liability except to the extent of their investment, but may profit from the activities as well. Some think this is a bad idea, because, in the case of for profit entities, it makes the profit motive all important, and dilutes the deterrent effect of criminal punishment, since it is yet unclear as to how to adequately criminally punish an entity.

Another legal fiction is the assumed name. An assumed name is simply that - an alias. It does not create a new entity, but merely puts society on notice that you are choosing to be known by this other name, usually for marketing purposes.

Today, I listened to the efforts of a business person to straighten out her filings at the SOS office. It appears that some one first filed an assumed name filing, let's say it was Willyouland Widgets. Assumed name filings create a right to use the assumed name, so the filer owned the right to use the name Willyouland Widgets. Later, she filed to create an entity called Willyouland, Inc., at which point a legal entity, or legal person, came into existence on that date. Prior to that date it did not exist. Have a cigar, Ms. Businessperson, you are the proud parent of a bouncing baby corporate entity.

The desk attendant told this business person that there was an assumed name filing for Willyouland Widgets, and that there was a corporate filing for Willyouland Widgets, Inc.. Then she gave incorrect legal advice - she told the woman that she could use either name, with or without the "Inc." as though they were the same thing. They are not the same thing.

The problem is that the woman (if she was the filer of the assumed name) as an individual owns the right to do business as Willyouland Widgets, so that any debts she incurs under the name Willyouland Widgets are personal to her. That includes if a widget blows up and mains someone who thought they were doing business with Willyouland Widgets because that was what was printed on his receipt. All of her personal assets are vulnerable to these claims. The joint household account into which she and her husband have their paychecks deposited could be seized, their wages garnished, many assets taken.

If she would just be careful always to use the name Willyouland Widgets, Inc., then she is putting creditors and buyers of widgets that they are doing business with a corporate entity and may look only to that corporate entities assets to satisfy any claims. With some exceptions, her personal assets are not at risk.

Maybe this businessperson will never face the issue. But if she does, it could be catastrophic. All because of a little "Inc."

Did I jump up there in that lobby and clear up the error? No. Nothing is as simple as it seems. Lawyers know that what they don't know about a situation can profoundly change what their advice might be. It could be that the business person did not own the assumed name filing at all, but that it had been filed by some one else. On the face of this situation, I thought I knew what was correct, but without a consultation and a review of the actual filings, I could not be certain my intervention wouldn't do more harm than good. One thing I do know, is that desk attendant never dreamed that what she was telling that businessperson constituted legal advice.

Still, I wonder if it wasn't just that simple, and if a brief encounter with a lawyer could save her a world of hurt later. I often wish life wasn't so complicated. Some of the complexities exist for good reason. But like so many things, sometimes the good reasons get lost in the tangle, and trip people up.

And of course because I am an attorney, I have to caution that this post should not under any circumstances be construed as legal advice, and that it should not be relied upon for any purpose whatsoever. The substance of this posting is conjectural and does and should not be construed to apply to any real life situation. If none of that convinces the reader to disregard the posting as legal advice, then I lied about the whole thing. Spoof on you.

And because I need this post to include a reminder of what is important, here is my nephew Tony: