Thursday, November 17, 2011

Why file your corporation or LLC in California

I received a question about filing for a business outside of California. While I agree that paying $800 year for a small business is ridiculous, the solution is not becoming a foreign (out-of-California) entity. I'll explain below, but the best solution sometimes a simple proprietorship or partnership. Here's why.

Any limited liability entity headquartered in California needs to register in California.
1) Filing in California gives you the privilege of enforcing your contractual rights in California. A court will dismiss a non-registered plaintiff because the privilege to enforce your contractual rights is in the state of the headquarters, as documented by the Articles.
2) California requires entities doing business in California but registered outside of California to file as a foreign entity. The filing expenses are the same and this provides full rights (including name protection through registration), but at the same annual cost of income tax (Franchise Fee). A foreign entity can omit the foreign entity registration if its operations in California are insubstantial, as by being transient or without an instate office, officers, or employees. If a person with the entity lives and conducts business for the entity in California, it qualifies as a foreign entity. Another way of thinking about registration is whether the entity is active in California. If the assets and operations are in another state, foreign entity registration is less likely a requirement.
3) While its true that other states do not require disclosure of officer names, a good sleuth can get the names without a lot of effort.
4) In every state, you must name an agent for service of process. Outside of California, that means 'hiring' a company to have a doorway and a person inside the door during regular business hours. The job of the person is to receive lawsuits and notices. The job of the person is NOT to make sure you receive the lawsuit or notice. An entity is subject to a default judgment and registration suspension if the entity fails to timely and properly reply.
5) Some states require you to effectively include portions of the operating agreement (bylaws) in your articles. This can tell people far more about your company than the company name, and require significant effort making sure the articles comply with the requirement.
6) California is comparatively lax about how the owners run the entity. Don't commit fraud, or break financial or security laws, and you are OK. Other states tell you how to run your business and require these statements in your articles or operating agreement.
7) Lastly - failure to register in California may result in substantial fines based on income and the minimum franchise fees.

As to non-registration (a simple partnership):
The usual goal of small business registration is limited liability. Liability arises from contractual obligations or negligence. If the business hasn't signed contracts of obligation and is not yet providing a product or service, the risk of liability is basically the same as having a hobby. If an obligation would risk more than you have on-hand to fulfill the obligation, then limited liability is warranted. Otherwise- what is there to worry about? If at some time you must register and quickly, there are ways to get registration within a week or two for the expense of a few hundred dollars, which is much less than the annual minimum franchise fee.

Also - many insurance companies offer errors and omission insurance. O&E covers you for business losses based on circumstances outside your control, generally including simple negligence, and some contractual obligations based on the policy. You are not covered for gross or intention negligence, fraud or breaking financial or security laws - but then limited liability does not cover those either.

Lastly - if you want name or brand protection, the filing of a city business license, county fictitious statement, and state and federal trademarks decently provide that protection. Caveat - the California Secretary of State does not crosscheck the business entity and trademark registrations. You get that security ONLY by registration.

Friday, October 14, 2011

What Is a Nursing Home?

I received a question about the definition of a Nursing Home. Over the years, I have visited many family members in such facilities. When I worked as a laboratory medical technician, I worked in the acute care areas of hospitals, in their care units and clinics, and in their adjacent nursing facilities. Thus, I have many, many memories of such places, and it turns out, the definition of a Nursing Home is a legal question suitable for this Blog.

In California, a 'nursing home' is not legally defined, but taking the term and words 'nursing home' generically, 'nursing' infers nursing care is provided while 'home' infers the facility provides long-term care. This seems reasonable in that California defines certain patient care services as within the practice of nursing. (Cal. Business & Professions Code Sec. 2725 et. seq.).

Under California law, there are many different types of facilities that could fit the generic term above. In reading these definitions, the rational for defining facilities seems to be based on (1) the different types of services provided, and (2) the facilities' staffing availabilities.

For example, a "general acute care hospital" provides medical, nursing, surgical, anesthesia, laboratory, radiology, pharmacy, and dietary services. (Cal. Health & Safety Code Sec. 1250(a). A Skilled Nursing Facility (SNF) "means a health facility that provides skilled nursing care and supportive care to patients whose primary need is for availability of skilled nursing care on an extended basis." (Cal. Health & Safety Code Sec. 1250(c)). An "intermediate care facility", on the other hand, provides "skilled nursing supervision" but not "continuous skilled nursing care". (Cal. Health & Safety Code Sec. 1250(d)). So for most people, a nursing home is likely a Skilled Nursing Facility or at least an Intermediate Care Facility. These should also fit the definition of a "nursing facility" under the Medicare and Medicaid programs. (Cal. Health & Safety Code Sec. 1250(k)).

California also differentiates based on patient and resident needs, as by whether the patient or resident is ambulatory (able to walk) and whether the person's infirmity is physical or mental, temporary (rehabilitative) or degrading, chemically related, developmentally related or generally age related or some other type.

Another distinction is by the vocation of the person providing the services. A doctor is present at all times at an acute care center. (Cal. Health & Safety Code Sec. 1250(a)). The definition of Skilled Nursing Facility, however, omits "medical staff". The SNFs I've seen though, were adjacent to or close to a hospital so medical staff was at least close by.

The legal definitions may also have developed to provide for nursing supervision (an "intermediate care facility") rather than nursing care (SNF). When I worked as a laboratory medical technician, a doctor made periodic visits while a seasoned Registered Nurse (RN) was present at all times in the facility and supervised the care given by less experienced RNs and the Certified Nursing Assistants (CNA) (a.k.a. Licensed Vocational Nurse outside of California).

Later in my career, I observed that the person making the periodic visits wasn't the doctor, but rather the seasoned RN, with a less experienced RN supervising the care given by the CNAs.

Now, with the exception of an acute care facility (a.k.a. hospital), it seems RNs are gone from most nursing facilities, and the only CNA is the pill-passer. The other care providers may have vocational training but it seems they are not certified or equivalently licensed.

My other observation is that many facilities have silently dropped the term "Nursing" from the business name because (seemingly to me) no one in administration, on staff or visiting has any significant nursing care training. Instead, they have "care managers". I'm told "care managers" have at least 'minimal care training but in my ten years of dealing with them, it seems more 'minimal' than 'care'.

As such, this article has gone full-circle. Based on law and my observations, a place with the word 'nursing' in its name likely provides nursing care and has (I hope) an RN on hand at some time during the day with CNAs providing nursing care and pill passing. If 'nursing' is not in the name, there is likely no RN, no CNA or otherwise, in the building - except perhaps for a patient or resident.

Thursday, May 26, 2011

Tattoos and Copyright

There's a sort of a boxing match going on now whether Mike Tyson's tattooist has a legal interest in the tattoo on the face of Ed Helms in the Warner Brothers movie, "The Hangover, Part II". The lawyers for S. Victor Whitmill, the tattooist, will disagree with me, but my answer is no.

Copyright protects "original works of authorship [that] can be perceived, reproduced, or otherwise communicated". (17 U.S.C. §102 (abridged)). Like most ideas, many works of art are not wholly original as there is some background in a previous work. Many people, including S. Victor Whitmill, call this inspiration. As a hard rule, requiring complete originality would disallow copyright because inspiration would negate originality to the whole of the work. Fortunately, the U.S. Supreme Court opened originality to "a two-fold requirement of independent creation and some minimal degree of creativity." (Feist.)

The benefit of this two-part independent creation and creativity rule is that a tattoo artist can get copyright protection in the portion not copied from the original. Thus, a tattoo artist does not get copyright protection by making a tattoo of a picture (because that is not independent creation), but the tattoo artist can get copyright protection in the inspired portion that has at least a minimal degree of creativity. In other words, the copyright protection may include an inspired portion, but not a copied portion.

Which brings us to whether S. Victor Whitmill has a copyright. He admitted his work was not independent creation. The crux of Whitmill's success will be in showing his work is creatively different, and not just different than the Maori tattoos that inspired him. That's because there is more to creativity than inspiration. The Warner Brothers lawyers will attempt to show that the Tyson tattoo is a combination of Maori tattoos, other tattoos, and even other art as well. This type of debate is common in copyright disputes to disallow the claimed creativity by showing that the parts that are independent from a major inspiration are common elements in the theme of the work, in essence, copied from elsewhere in the field of the art.

For example, movies often contain common elements, guns in westerns, jumps in car chases, etc. Even tattoos contain common elements. Many tattoos are a kind of 'warrior' brand of art by including knives, other weapons, pseudo-weapons, slogans, etc. The Warner Brothers lawyers will likely parade people and photos to the judge's discontent to show the Tyson tattoo is merely a combination of tattoos and weapons.

This anti-copyright argument has its basis in that we as a society do not want someone to use a variation on a theme to lock up copyright protection to the theme. In other words, Maori tattoos have been in existence for a long time, there are many books on Maori tattoos, and tattoo artists study tattoos just as any artist studies works of their peers and predecessors. As a society, we do not want art to lock up a marginally creative idea that prevents its enjoyment by everyone.
Looking at the Tyson tattoo, in fact, reveals the elements of knife-like tips, curves, and double and triple parallel lines that are thematic to Maori tattoos. The three-piece knuckle slasher, meanwhile, is akin to that of Wolverine, i.e., a weapon. As they say in law, in the totality of circumstances, the creativity of the Tyson tattoo is thin, so thin in fact, that Warner Brothers is free to copy it.

If you are or know a tattoo artist, do not be discouraged. Tattoos are art, and copyright will protect sufficiently creative art. Before you ponder on, though, consider copyright registration for your tattoo art, the filing fee is only $35. The Copyright Office rarely denies registration and registration is proof of both your creation of the art and the date of creation. Besides being inexpensive, registration is a requirement before you can sue for copyright infringement.