BILL ANALYSIS Ó
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|Hearing Date:June 25, 2012 |Bill No:AB |
| |1325 |
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SENATE COMMITTEE ON BUSINESS, PROFESSIONS
AND ECONOMIC DEVELOPMENT
Senator Curren D. Price, Jr., Chair
Bill No: AB 1325Author:Lara
As Amended:June 19, 2012 Fiscal:Yes
SUBJECT: Business: fictitious business name statements.
SUMMARY: Requires fictitious business name statement registrants to
provide specified personal identification at the time of filing; and
requires the fictitious business name statement to contain language
specifying that false declarations are a misdemeanor punishable by a
fine of up to $1,000.
Existing law:
1)Provides for individuals or partnerships doing business under
fictitious names to file a fictitious business name statement. The
filing of a fictitious business name is designed to make available
to the public the identities of persons doing business under the
fictitious name. (Business and Professions Code (BPC) § 17900)
2)Defines "fictitious business name" to mean: (BPC § 17900 (b))
a) For an individual, a name that does not include the surname of
the individual, or that suggests additional owners of the
business.
b) For a partnership, a name that does not include the surname of
each general partner, or that suggests additional owners.
c) For a corporation, any name other than the corporate name
filed with the Secretary of State.
d) For a limited partnership, any name other than limited
partnership name filed with the Secretary of State.
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e) For a limited liability company, any name other than limited
liability company name filed with the Secretary of State.
3)Requires every person who regularly transacts business in California
for profit under a fictitious business name to file and maintain a
current fictitious business name statement. (BPC § 17910)
4)Requires the fictitious business name statement to contain specified
information, including the statement: "A registrant who declares as
true information which he or she knows to be false is guilty of a
crime." (BPC § 17913 (a))
5)Specifies that a registrant who declares as true any material matter
regarding the content of fictitious business name statements that he
or she knows to be false is guilty of a misdemeanor. (BPC § 17913
(c))
6)Requires a fictitious business name statement to be published in a
newspaper of general circulation in the county in which the
principal place of business of the registrant is located, except as
specified, to be signed by specified individuals, and to be filed
with the county clerk in the county where the business is located.
(BPC § 17917)
7)Specifies the requirements for what constitutes filing of a
fictitious business name statement, including: presentation of the
fictitious business name statement for filing, submitting the filing
fee, and acceptance of the statement by the county clerk. (BPC §
17916)
8)Specifies that any person who executes, files, or publishes any
fictitious business name statement, knowing that it is false, in
whole or in part, shall be guilty of a misdemeanor punishable by a
fine not to exceed $1,000. (BPC § 17930)
9)Requires that upon ceasing to transact business under a fictitious
business name, a registrant must file a statement of abandonment,
executed in the same manner as a fictitious business name statement,
as specified. (BPC § 17922)
10)Provides for a partner in a partnership who is withdrawing from a
partnership to file a statement of withdrawal executed in the same
manner as a fictitious business name statement, as specified. (BPC
§ 17923)
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11)Provides for a county clerk to maintain a file of each fictitious
business name statement for four years, and provides for the
abandonment and destruction of a fictitious business name statement
as specified. (BPC § 17927)
This bill:
1)Revises the wording of the fictitious business name statement in
Item # 4, above, to instead state: "A registrant who declares as
true any material matter pursuant to Section 17913 of the Business
and Professions Code that the registrant knows to be false is guilty
of a misdemeanor punishable by a fine not to exceed $1,000."
2)Recasts the criminal provision in Item # 5, above, to instead
provide that a person registering a fictitious business name
statement who declares as true any material matter in the fictitious
business name statement that the registrant knows to be false is
guilty of a misdemeanor punishable by a fine not to exceed $1,000.
3)Requires a registrant filing a fictitious business name to display a
personal identification in the form of a California driver's license
or other identification acceptable to the county clerk to adequately
determine the identity of the registrant, and authorizes the county
clerk to require the registrant to complete and sign an affidavit of
identity statement.
4)If the registrant is a corporation, a limited liability company, a
limited liability partnership, an original certificate of status
issued by the Secretary of State certifying the current existence
and good standing of that business entity shall be deemed acceptable
identification
5)Authorizes a county clerk to require a registrant that mails a
fictitious business name statement to a county clerk's office for
filing to submit a completed and notarized affidavit of identity
statement. A registrant that is a corporation, a limited liability
company, a limited liability partnership, if required by the county
clerk to submit an affidavit of identity statement, shall also
submit an original certificate of status issued by the Secretary of
State certifying the current existence and good standing of that
business entity;
6)Specifies that, to constitute a filing, the fictitious business name
statement must be accompanied by proper identification, and
accompanied by a completed affidavit of identity statement, if
required by the county clerk, as specified.
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7)Makes conforming changes regarding the documentation and affidavits
of personal identity in relation to the filing of: a notice of
abandonment, a notice of withdrawal from a partnership, and the
county clerk's maintenance of a fictitious business name file.
8)Makes reference to "married couple" rather than to "husband and
wife."
9)Makes various technical cleanup and conforming changes.
10)Delays the implementation of this measure's provisions until
January 1, 2014.
FISCAL EFFECT: The Assembly Appropriations Committee analysis dated
January 19, 2012, indicates costs associated with county clerks'
offices checking proof of identity and filing a copy of that proof
with the fictitious business name statement should be relatively
minor. To the extent the costs are not absorbable, current law gives
county clerks the authority to increase their filing fees to cover any
additional costs.
COMMENTS:
1.Purpose. This bill is sponsored by the Author to strengthen consumer
protections and curb fictitious business name identity theft by
amending existing law to require applicants to present proper
identification at the time of filling for a fictitious business
name. The provision specifies the types of identification
acceptable to county clerks and the requirements for filing a
fictitious business name via mail. AB 1325 would also amend the
existing fictitious business name statement to include a reference
to the penalties for providing false information.
The Author argues the need for the bill, stating: "Existing law,
however, does not require registrants to present a form of
identification to county clerk officials in order to verify that the
applicant's identity or business address matches the information
they submitted on the fictitious business name form. The deficiency
in current law leaves room for fraudulent activity whereby
registrants use the addresses of unsuspecting Californians to file a
fictitious business name Statement."
2.Background. The law requires every person who regularly transacts
business in California for profit under a fictitious business name
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to file and maintain a current fictitious business name statement
with the county clerk in which the principal place of business is
located. This filing is designed to protect consumers who deal with
individuals or partnerships that operate under fictitious business
names by making available to the public the identities of people or
companies doing business under a fictitious name.
The use of a fictitious business name can be advantageous for
individuals and corporations because it allows operation of a
business or multiple businesses at minimal cost, without having to
use a personal name or create an entirely new legal entity for each
business.
Businesses must file the fictitious business name statement, which is
effective for five years, within 40 days of their first transaction.
An applicant may have more than one fictitious business name and
there may be more than one registrant per fictitious business name.
All information on the fictitious business name statement is public
record under the California Public Record Act, including the
residence address.
According to a column published in the Los Angeles Times in 2010, an
elderly resident of Los Angeles County discovered her residential
address had been used without her knowledge or consent for several
fictitious business name statements when the Los Angeles County
Registrar-Recorder/County Clerk notified her of the registrations.
Mail for the fictitious businesses and the person who registered
them began arriving at the home, which prompted the resident to
contact local government representatives and file a complaint with
the United States Postal Service (USPS) and a report with the
police. The article notes that a person might file such false
statements in order to lend legitimacy to fraudulent business
activities, because a search of a county registrar's website would
yield the registered fictitious business names.
While current law sets out a variety of requirements for filing
fictitious business name statements, it does not require registrants
to provide verifiable personal or corporate identification when
doing so. The statement also does not specify the penalty and fine
for providing false information. This bill requires those who file
fictitious business name statements to provide identification at the
time of filing, and requires the filing form to explicitly state
that providing false information on the form is a misdemeanor
punishable by a fine of up to $1,000.
3.Related Legislation. AB 1290 (Mendoza, 2008) allowed a county clerk,
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in the event that the notice of pending expiration of a fictitious
business license is returned to the clerk by USPS as undeliverable,
to dispose of the returned notice without delay. This bill was
vetoed.
4.Arguments in Support. Los Angeles County Board of Supervisors
believes that the bill would help limit fraudulent practices
associated with the filing of fictitious business name forms and, in
doing so, would increase consumer protections.
Norwalk Chamber of Commerce argues that there is definitely a
deficiency in current law when predators are allowed to commit
fraud, give false names or addresses, and prey on unsuspecting
Californians. While it will never be possible to stop all crime, AB
1325 will act as a deterrent in protecting consumers throughout the
state.
The Consumer Federation of California (CFC) contends that not requiring
any identification to file for a fictitious business name has
resulted in identity theft for seniors, where home addresses are
used to register fictitious business names. In such cases, the
victims do not know about the fraud until a notice arrives in the
mail, often from the Franchise Tax Board regarding a business that
has been registered at the address. Theft of identity to establish
a fictitious business name not only violates the rights of victims,
but it also abuses the purpose of the fictitious business name
statement,
5.Opposed Unless Amended. The California Association of Clerks and
Election Officials (CACEO) had previously taken an oppose unless
amended position on the bill, however CACEO has notified the
Committee that they have now adopted a "neutral" position on the
bill as a result of the latest amendments to the bill.
6.Arguments in Opposition. Santa Monica Observer Newspaper states that
the bill is unnecessary to prevent fraud and is an unnecessary
hurdle to filing a fictitious business name, and further argues the
bill would maker it harder to open a business in California at a
time where there is substantial conversation among the business
community condemning California as THE most difficult state in which
to open a business.
7.Author's Amendments to be Made in Committee. The latest amendments
to the bill contain several drafting errors. The following
amendments are technical and conforming changes which will be
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proposed as Author's amendment in Committee.
Page 4, line 10, strike out "husband and the wife" and insert:
married couple
Page 4, lines 31 and 32, strike out "husband and wife" and
insert: married couple
Page 9, line 18, after "statement," insert: and one copy
Page 10, line 8, strike out "husband and wife" and insert:
married couple
Page 10, line 9, strike out "the husband and wife" and insert:
parties to the marriage
Page 15 Line 20, after "other documents" insert: "or actions"
SUPPORT AND OPPOSITION:
Support:
Consumer Federation of California
Los Angeles County Board of Supervisors
Los Angeles County District Attorney's Office
Norwalk Chamber of Commerce
Oppose Unless Amended
California Association of Clerks and Election Officials
Opposition:
Santa Monica Observer Newspaper
Consultant:G. V. Ayers