Page 38 - AVN July 2016

LEGAL NEWS
LEGALESE | | By Clyde DeWitt
‘we don’t give
”Think about the
legal advice’
part. These
companies are
want to take advantage of Nevada’s lack of corporate income tax;
some just like to take tax-deductible trips to Vegas; and some would
no different than
a stationery store
that sells legal
forms.
Clyde DeWitt is a Las Vegas and Los Angeles
attorney, whose practice has been focused on adult
entertainment since 1980. He can be reached at
ClydeDeWitt@earthlink.net. More information can
be found at ClydeDeWitt.com. This column is not a
substitute for personal legal advice. Rather, it is to alert
readers to legal issues warranting advice from your
personal attorney.
38 | AVN.com | 7.16
Lawyers vs. Paper Pushers
Sellers of legal forms don’t give legal advice
You may read this column as an unabashed advertisement for lawyers.
Maybe it is. However, after years of undoing mistakes arising from
using legal-form services, the author figures that it is time to look at
this problem.
Nevada, for example, has been a good place from which to operate.
Many companies—especially internet companies—seek to plant their
roots in Nevada. Some want the glitz of the Sin City moniker; some
your local registered agent than a lawyer might.
That isn’t to say that all Incorporation, Inc.-type outfits
are overpriced. However, if you compare their prices with
attorneys, you might think twice about Incorporation,
Inc.
There’s more. Incorporation, Inc. professes to give no
legal advice. So, you and your Hong Kong partner need
to think about a great deal more
than legal forms. What if
one of you dies?
What if one
of you stops
performing
or becomes
disabled? Oh,
you are only
in your 30s; no
problem, right? Wrong!
Do you want to be partners
with your partner’s spouse?
In the 1970s, Robert Ringer
wrote a series of books, the
cornerstone of which was
Looking Out For #1. In his books,
Ringer talks about a lawyer—he
called him “Legalman.” After
blasting Legalman in an earlier
book because Legalman kept
screwing up deals, Ringer admitted
in a later book that Legalman was
useful. Legalman, he opined, was good
at identifying things that can go wrong
because Legalman had seen it all.
So, assume, for example, two buddies get
together. One is an artist and the other is a numbers
person. Artist has no clue about how to run a business;
numbers guy is a CPA. Let’s say CPA dies. Incorporation,
Inc. didn’t give you a form for that, did it? There’s a
thing called a buy-sell agreement. Do you really want
Incorporation, Inc. to give you a form for that without
consultation with an attorney?
There are two axioms that come into play here. One
that has been around for decades is, “A lawyer who
represents himself”—which is exactly what you would
be doing if you use Incorporation, Inc.—“has a fool for a
client.” And you probably aren’t a lawyer.
The second that is believed to be original with this
author is, metaphorically, “Don’t fill your own teeth.”
That is what you could be doing, with Incorporation, Inc.
selling you the drill.
So before you do that, it would behoove you to speak
to an attorney first. You might be surprised to find out
that it doesn’t cost all that much more to acquire some
legal advice with the forms. And, while you are at it, talk
to a CPA at the outset, rather than waiting until your
entity’s tax return is coming due. Any attorney will tell
you to do that.
rather keep their neighbors in their Small Town America
locale oblivious to the fact that they are running
an adult website from down the street.
So, there are many who set up a mail
drop in Nevada, set up a Nevada LLC
or corporation and operate it by
remote control—sort of. They
use a legal-form service to get
started. For the purpose of the
article, let’s call this service
“Incorporation, Inc.” There
appears to be no company
with that name; if there
is, this column does not
necessarily apply to it.
Companies use
Incorporation, Inc. to set
up their corporation or LLC,
thinking that it is saving them
money. Wrong; at least in Nevada,
a lawyer can set up a corporation
or LLC for little if any more than
Incorporation, Inc.—and probably will
charge no more than Incorporation, Inc.
(or even less) to act as registered agent. (You
probably know that every corporation or LLC is required to have
a registered agent for service of process in the state in which it is
chartered.)
If you surf the Internet, you will find a laundry list of companies
that will set up a Nevada corporation or LLC for you, with the caveat
that they do not give legal advice. Many of the companies will do
that for you in any of the 50 states (and, presumably the District of
Columbia).
Think about the “we don’t give legal advice” part. These companies
are no different than a stationery store that sells legal forms. They
don’t help you fill them out. If they do, they are engaged in the
unauthorized practice of law, which is why they claim that they don’t
give legal advice.
So, for example, suppose that you want to set up a corporation—
you in the USA and your partner in Hong Kong. You tell
Incorporation, Inc. that you want to set up a Subchapter-S corporation
in Nevada. They give you the form. They don’t give you legal
advice, so they don’t tell you that the guy in Hong Kong can’t be
a shareholder in a Subchapter-S corporation. As a result, you are
stuck with two levels of taxation. (A lawyer would have known to
recommend an LLC instead.)
The number of stories of Incorporation, Inc.-type nightmares must
be numerous. Worse, Incorporation, Inc. probably charges more to be