[Sign Up Now] to Receive Our FREE Daily SCVTV-SCVNews Digest by E-Mail

Inside
Weather
Santa Clarita CA
Clear
Clear
64°F
 
Calendar
Today in
S.C.V. History
September 21
1974 - COC's new Cougar Stadium opens for first game of football season; Harbor beats COC, 26-21 [story]


Commentary by Carl Kanowsky Esq.
| Friday, Nov 1, 2013
Carl Kanowsky, Esq.

Carl Kanowsky, Esq.

Peter Jones, Paul Smith and Mary Johnson decided to form a new California corporation. The company made fire-retardant clothes. They named it Puff Inc.

They filed the articles of incorporation, signed a lease for their new offices, and elected the three of them to the board of directors.

Business went extremely well. The three knew how to make and sell the clothes. But they didn’t sign up with a good business CPA or attorney.

In dividing up everyone’s responsibilities, Paul was in charge of sales, Peter handled the manufacturing and Mary headed up the research and development department.

What with the crush of business, demanding families at home and the fact that the three really didn’t like each other that much, they rarely got together to discuss how things were going and to plan for the future.

Also, since each one had signature authority on the checking account, the company was paying for some of the personal expenses of the three partners, such as home mortgages and children’s tuition. Each of the partners also had a company credit card they used to pay for both company expenses and family bills.

Paul, the president, began receiving numerous notices and solicitations in the mail to handle some business requirement having to do with “corporate compliance.” He had no idea what this meant, nor did the other two. Most of the solicitations looked like obvious scams, so Paul – after consulting with his partners – decided to throw them away.

Unfortunately, one of the letters Paul threw out was from the Secretary of State’s office, telling the corporation to file its Statement of Information. So of course, this did not get filed. Consequently, the state of California suspended Puff Inc.

These practices and habits of Puff’s owners had some very nasty results for the owners.

First, one of Puff’s main customers refused to pay invoices totaling over $100,000. Paul hired an attorney to go after the recalcitrant client. The bad news for Puff was that since it was suspended as a company, it could not legally function.

A suspended corporation cannot file a lawsuit against anyone in California, or even defend against one. It cannot appeal an adverse judgment or enforce a judgment it may have received before it was suspended. Also, a suspended corporation may not sell, transfer or exchange real property.

Contracts entered into by the corporation during the suspension are voidable at the option of the other party, but not at the corporation’s option. The corporation may even lose its corporate name.

Exercise of any corporate authority or powers during the suspension period can lead to personal liability for the owners.

Now, Peter, Paul and Mary realized the importance of filing those annual statements with the secretary of state. They thought they had learned their lesson.

But the real bad news was yet to hit them. You see, a fireman, little Jackie Paper, was burned in a fire while wearing a Puff fire suit. He sued Puff Inc., and Peter, Paul and Mary individually.

Paper argued that the owners were personally liable since they hadn’t held any shareholder or director meetings, had commingled corporate funds with personal money, and used corporate credit cards to pay off family debts.

While Paper’s claim might not have had a slam-dunk winner, he had enough points that things got pretty hot for Peter, Paul and Mary. So they decided to settle the suit to avoid a trial.

Ever since these events, they make sure the corporation timely files its Statement of Information and pays state taxes. They also realized that if they want the protection of the corporation, they have to follow the rules and have annual meetings, keeping records of them, as well as clearly segregating corporate debt from personal debt.

 

Carl Kanowsky of Kanowsky & Associates is an attorney in the Santa Clarita Valley. He may be reached by email at cjk@kanowskylaw.com. Nothing contained herein shall be or is intended to be construed as providing legal advice.

Comment On This Story
COMMENT POLICY: We welcome comments from individuals and businesses. All comments are moderated. Comments are subject to rejection if they are vulgar, combative, or in poor taste.
REAL NAMES ONLY: All posters must use their real individual or business name. This applies equally to Twitter account holders who use a nickname.

0 Comments

You can be the first one to leave a comment.

Leave a Comment


Opinion Section Policy
All opinions and ideas are welcome. Factually inaccurate, libelous, defamatory, profane or hateful statements are not. Your words must be your own. All commentary is subject to editing for legibility. There is no length limit, but the shorter, the better the odds of people reading it. "Local" SCV-related topics are preferred. Send commentary to: LETTERS (at) SCVNEWS.COM. Author's full name, community name, phone number and e-mail address are required. Phone numbers and e-mail addresses are not published except at author's request. Acknowledgment of submission does not guarantee publication.
Read More From...
RECENT COMMENTARY
Friday, Sep 14, 2018
Original Medicare and Medicare Advantage have different benefits and costs that you should consider based on your personal needs. Medicare open enrollment season runs from Oct. 15 to Dec. 7, and it’s a good idea to know how the two types of Medicare work before you select one.
Wednesday, Sep 5, 2018
In his September column, Santa Clarita City Manager Ken Striplin outlines the city's 'Heads up' safety campaign against distracted driving and walking.
Tuesday, Sep 4, 2018
Nestled between the sports fields and hiking trails at Central Park is a grove of tree stumps.
Wednesday, Aug 22, 2018
If we can secure U.S. Rep. Steve Knight’s leadership, we have the chance to improve recreational opportunities and protect open space in the mountains that flank and define the Santa Clarita Valley.
Thursday, Aug 2, 2018
City Manager Ken Striplin notes that a lot has changed in Santa Clarita since the 1970s, except the SCV Sheriff's Station, which opened 46 years ago and will finally be replaced by a brand-new 46,000-square-foot, state-of-the-art, centrally located Sheriff’s Station on Golden Valley Road.
Wednesday, Aug 1, 2018
​There are many things that make our City the unique and special place it is.

Latest Additions to SCVNews.com
1974 - COC's new Cougar Stadium opens for first game of football season; Harbor beats COC, 26-21 [story]
The Old Town Newhall Association’s Chalk Art Festival is coming this weekend with dozens of local artists and organizations ready to share their works with the Santa Clarita Valley community.
Organizations, Local Artists Taking Part in This Weekend’s Chalk Art Festival
County of Los Angeles Department of Animal Care and Control (DACC) encourages all pet owners to be prepared before disaster strikes.
Animal Care & Control Encourages Pet Owners to Prepare for Disasters
The contemporary art journal X-TRA and the Broad Museum in Downtown Los Angeles present, "The Un-Private Collection Workshop: Edgar Arceneaux" on Saturday, Sept. 22.
Sept. 22: CalArts Alum Presents Financial Workshop at Broad Museum
NORTHRIDGE - Senior defender Lindsay Kutscher has been selected as one of 30 women's soccer candidates for the Senior CLASS award.
CSUN’s Lindsay Kutscher Candidate for Senior CLASS Award
The Center for Digital Government (CDG) has presented the Los Angeles County Department of Parks and Recreation with one of its Best of California Awards, which recognize state and local government organizations for innovative technology initiatives.
County Parks & Recreation Recognized with Best of California Award
The city of Santa Clarita and Caltrans engineers have partnered with Caltrans to provide traffic enhancements.
City Implements Traffic Improvements at Sierra Highway, Golden Valley Road
Continuing the momentum developed from such programs as iTEENS during the school year and the Teen Summit hosted earlier in 2018, the city of Santa Clarita will host a teen leadership development training on Wednesday, Sept. 26, from 4:00 p.m. - 8:00 p.m., at the Newhall Community Center (22421 Market Street).
Sept. 26: ‘I Can Achieve Now!’ Teen Leadership Workshop
NORTHRIDGE - CSUN's Michael Merchan has been named Co-Big West Athlete of the Week for men's cross country. Merchan is the first Matador men's cross country student-athlete to earn the award since it was established in 2001. Merchan shares the honor with Nick Randazzo of UCSB.
CSUN’s Merchan Nabs Big West Co-Athlete of the Week
California Secretary of State Alex Padilla stopped by Golden Valley High School Wednesday morning to encourage students to register to vote.
CA Secretary of State Alex Padilla Encourages Local Students to Vote
SACRAMENTO — California Attorney General Xavier Becerra, the California Air Resources Board, and New Mexico Attorney General Hector Balderas filed suit Tuesday against the Trump Administration for its unlawful attempt to dismantle critical environmental waste protections.
Becerra Sues Trump Admin for Unlawful Attempt to Dismantle Waste Protections
Kaiser Permanente will open all seasonal flu clinics throughout Southern California on Saturday, Sept. 22, and urges all members to get their no-cost vaccinations early.
Sept. 22: Kaiser Permanente Opens Seasonal Flu Clinics Throughout So Cal
On Tuesday, The Home Depot Foundation increased its financial support to $3 million for disaster relief efforts and communities impacted by recent disasters, including Hurricane Florence, Olivia, the California wildfires and flooding in the Midwest.
Home Depot Foundation Increases Financial Support for Disaster Relief Efforts
Los Angeles County took a major step towards fostering a vibrant business ecosystem to help the local bioscience industry reach its full potential as a job-creating economic engine that advances breakthroughs in global health.
County Committed to Becoming Bioscience Global Leader
SACRAMENTO – Every day, thousands of parents and caregivers in California travel with children in their vehicle.
Sept. 23-29: Child Passenger Safety Week
The 3rd annual Gran Fondo Santa Clarita will be held Saturday, Sept. 29, beginning at 8:00 a.m.
Sept. 29: Gran Fondo Santa Clarita
The Santa Clarita Valley Chamber of Commerce invites you to their 34th annual Oktoberfest Golf Tournament, sponsored by Chiquita Canyon. Sponsorship opportunities are still available.
Oct. 22: SCV Chamber’s 34th Annual Oktoberfest Golf Tournament
1954 - C-46 cargo plane crashes at Saugus Drunk Farm; Civil Air Patrol chaplains parachute to safety [story]
Filmmaker Magazine recently unveiled its annual roundup of the 25 New Faces of Independent Film, and CalArtians Hannah Peterson (Film/Video MFA 2018) and Richard Van (Film/Video MFA 2018) were included on the 2018 list.
CalArtians Among Filmmaker Magazine’s 25 New Faces of Indie Film
The 19th season of KCET's Fine Cut Festival of Films will premiere on Wednesday, Sept. 26, at 9 p.m. on KCET in Los Angeles, and of the 16 finalists chosen, four films are by CalArtians from the School of Film/Video.
Four CalArtians in KCET’s Fine Cut Festival of Films
The Los Angeles Dodgers on Wednesday reinstated right-handed pitcher John Axford from the 10-day disabled list and left-handed pitcher Tony Cingrani from the 60-day disabled list, and recalled right-handed pitcher Yimi Garcia from Single-A Rancho Cucamonga.
Dodgers Reinstate Axford, Cingrani from DL; Recall Garcia
The Community Development Commission/Housing Authority of the county of Los Angeles has released Notice of Funding Availability Round 24-A, which will provide capital funding and vouchers for the creation and operation of multifamily rental housing units.
County Releases Funding Application to Increase Affordable Housing
The Master's University women's basketball team's schedule for 2018-2019 looks something like the NAIA Division 1 national tournament bracket from a year ago.
Master’s Women’s Basketball Unveils 2018-2019 Schedule
There's a sense in which this week's No. 14 ranking, the program's highest since 2013, validates last season's rebuild for The Master's University women's volleyball team.
A Peek at the Polls: TMU Women’s Volleyball Rises to No. 14
The Mustangs men's golf team pushed into second place on Monday at Olivas Links Golf Course in Ventura before falling back into a tie for sixth by Tuesday's finish.
Dudeck, Brueckner’s Hole-in-One Highlight Ventura Match for TMU
Florida National University spotted The Master's two first-half goals and then scored four unanswered goals spanning both halves to post a 4-2 win over the Mustangs on Reese Field on Tuesday.
Mustangs Men’s Soccer Team Falls to Florida National 4-2
The city of Santa Clarita will present a visual arts symposium at The Centre on Saturday, Oct. 20, free and open to the public.
Oct. 20: Free Visual Arts Symposium at The Centre
Six different Mustangs scored in an 8-0 win over Mills College on Sunday, the non-conference win lifting Master's to 6-2-1 on the season and extending its winning streak to three.
Six Mustangs Score in Win Over Mills College
College of the Canyons' women's volleyball team (5-4) took down the Warriors 3-2 to begin the day, then played a tough five-set match vs. No. 8 Grossmont College, eventually falling 3-2.
COC Volleyball Claws No. 3 El Camino, Goes 5 with No. 8 Grossmont
College of the Canyons competed at the California Community College Athletic Association Southern California Preview on Friday, providing the Cougars with an early look at the regional competition that will be vying for a trip to the state championship meet later this fall.
Cougar Cross Country Teams Compete at SoCal Preview
The College of the Canyons Cougars football team crushed the Santa Barbara City College Vaqueros 63-0 on Saturday.
No. 6 Canyons Crushes Santa Barbara 63-0
Los Angeles County is ramping up its efforts to register all eligible citizens to vote in the Nov. 6 General Election, including those currently or previously incarcerated or otherwise involved with the justice system.
County Steps Up Inmate Voter Registration
Jeffrey Watson is the new Executive Vice President- Strategic Initiatives and Thomas Fiebig has been named Vice President and Manager of the new Loan Production Office for Mission Valley Bank.
Watson Joins Mission Valley Bank as EVP of Strategic Initiatives
Detectives are seeking other possible victims of a Santa Clarita Valley woman arrested Monday on suspicion of embezzling more than $88,000 from a number of non-profit organizations.
Detectives Seek Other Victims of Suspected Embezzler
Paving the way for greater local workforce participation and veteran employment opportunities, the SCV Water Board of Directors authorized a Community Workforce Agreement with the Los Angeles/Orange Counties Building and Construction Trades Council at the water agency's Sept. 18 board meeting.
SCV Water, Trades Council Team for Community Workforce Deal