California’s GO-Biz Site Bedeviled By Errors and Omissions

by Allen Matkins
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According to the website, the California Governor’s Office of Business and Economic Development (GO-Biz) was created ”to serve as California’s single point of contact for economic development and job creation efforts”. While the site does provide some very basic level of information, it is dangerously incomplete and riddled with manifest errors. No advice would be better than bad advice.

“It Sounds Funny I Know, But It Really Is So, Oh, I’m My Own Grandpa”

For example, the website includes a page on “Defining a Business” which includes links to various types of business entities, including corporations. The link to corporations, provides brief information on “registering” domestic corporations, nonprofit corporations, and foreign corporations. The description of domestic corporation “registration” is as follows:

Domestic stock companies must complete the Articles of Incorporation and pay a fee to the Secretary of State. There are three versions of the Articles of Incorporation: general stock corporation, professional corporation and close corporation.

The first statement is technically impossible, a corporation can’t complete its own articles of incorporation because it doesn’t exist until the articles are filed with the Secretary of State’s office. Cal. Corp. Code § 200(c). In fact, one or more incorporators must execute execute and file the articles of incorporation. Cal. Corp. Code § 200(a).

The second sentence is also not correct. California law permits the articles of incorporation to include a wide range of optional provisions beyond the limited number of required provisions (i.e., the name, applicable statement of purpose, initial agent for service or process, and capital structure). Cal. Corp. Code §§ 202 & 204. Thus, there are a huge number of possible versions of articles of incorporation for corporations organized under the General Corporation Law. Even if the intended meaning was that there are three types of corporations, that assertion would be equally incorrect. For example, California permits the formation of both flexible purpose and benefit corporations. See California’s Two New Corporate Forms – And The Winner Is . . .

Corporations are Persons, But Not People

Similar errors abound in the information provided with respect to limited partnerships, which begins with this misstatement: “[l]imited partnerships are formed by two or more people . . .” (emphasis added). Under the Uniform Limited Partnership Act of 2008, a limited partnership is defined as an entity which is formed “by two or more persons“. Cal. Corp. Code § 15901.02(q). ”Persons” may be people but not all persons are people. The Act defines a “person” to mean an “individual, partnership, limited partnership, trust, estate association, corporation, limited liability company, or other entity, whether domestic or foreign”. Cal. Corp. Code § 15901.02(y).

No Blue Skies Will Be Smiling At Me

As a former securities regulator, perhaps the most alarming omission is the complete absence of any mention of the securities laws or even the Department of Corporations. Any layperson viewing this site would have no clue that they simply couldn’t sell securities to anyone and in any manner they wish.

New Law Requires More Nonprofit Disclosure on GO-Biz Website

Last year, the legislature enacted AB 2641 (Skinner) requiring the GO-Biz website to provide additional specific information on formation of nonprofit corporations. Let’s hope that the information provided is more complete an accurate than what is currently available.

 

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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