LLCs & Corporations

Today I received a troubling email from Jeff Grant, Director of the Corporations Division of the Arizona Corporation Commission.  On September 4, 2009, Governor Brewer vetoed SB 1025 that would have provided an additional $2.8 million in funding for the ACC’s Corporations Division.  As a result, the ACC is underfunded by 40 percent and it’s ability to service the new and continuing businesses of Arizona will be severely degraded.  Wait times for approval of new entities could exceed hundreds of days, which would delay the creation of new businesses and jobs in Arizona.

The Arizona Corporation Commission needs our help to contact our state legislative representatives and senators and ask them to fully fund the ACC immediately.  Please take the action Jeff Grant recommends at the end of his email message.

Contents of Jeff Grant’s email to me of September 25, 200

My name is Jeff Grant and I’m the Director of the Corporations Division of the Arizona Corporation Commission. You are receiving this email because you were on a user group list that a former director, Dave Raber created to be able to communicate with you at various times. This is another one of those times.

Many of you may already know that we are facing a serious funding crisis. The attached document gives you the history behind this issue and provides you with the impacts to the Division if the fees we are currently collecting are not appropriated back to the Corporations Division.

As of today, when we issued payroll, my budget is now in the red. In order to to be able to pay our bills, serious cuts in staffing along with furloughs will have to be implemented.

We are looking at cuts and furloughs that will greatly impact our turnaround times. If the legislature doesn’t act to restore the $2.8 million in annual report fees to the Division’s $4.5 million budget, turnaround times, in just a matter of months, could explode to well into the hundreds of days for non-expedited documents and approaching 50 days for expedites.

We need your help. After reading the attached document, please call or email your legislator and the President of the Senate, Speaker of the House and Governor’s Office.

If you have any questions, you can reach me at 602-542-0776. Thank you for your help with this serious problem.

Jeff Grant, Director
Corporations Division
Arizona Corporation Commission
602-542-0776

The following was attached to Mr. Grant’s email message and it sheds more light on the reason there is a funding problem, what you can do to help prod the legislature to action and why it is important to restore the inadvertent funding cuts.

How the problem arose:

On Friday, September 4, 2009, the Governor vetoed SB 1025 (for reasons unrelated to the ACC), which included language that would have avoided the ACC’s funding problem.  The Governor signed the general appropriation bill for the ACC, but that Bill did not include an appropriation from the general fund to the ACC.

Why?  Until this year, the money to run the Corporations Division came from both the general fund (60%) and the public access fund.  This year, the legislature, the Governor and the ACC worked together to shift the funding to come entirely from the public access fund.

Because the funding was being shifted from the general fund to the public access fund in SB 1025, the ACC agreed this fiscal year to have the Corporations Division appropriation shifted, from being reliant on both general fund and public access fund revenue, to being entirely funded by revenue from the public access fund.  Roughly 40% of the Corporations Division funding would have come from the general fund and 60% from the public access fund, without this funding shift.

In order to accomplish the shift to entire dependency on the public access fund, SB 1025 provided that annual fees paid by profit and business corporations were to be redirected for deposit to the public access fund.  When the Governor vetoed SB 1025, the action left no statutory funding mechanism to shift revenue from these fees to the public access fund from the general fund.

The good news is both the Governor and legislature agreed to the funding shift and support it.  Unfortunately, without the statutory language to facilitate the funding shift, the Corporations Division lacks the funds to operate adequately.

Simply stated, $2.8 million in anticipated revenue for FY 2010 cannot currently be shifted to the ACC to help fund the operations of the Corporations Division without additional action by the legislature.

What you can do:

We urge you to call your legislator, and call the offices of President Burns—602-926-5993 and Speaker Adams—602-926-5495 ([email protected]). Please also call the Chairmen of the Senate and House Appropriations Committees—Senator Russell Pearce ([email protected]) in the Senate—602-926-5760, and Representative John Kavanagh ([email protected])—602-926-5170 in the House and call the chairs at the Senate and House Commerce Committees: Barbara Leff—(602) 926-4486 ([email protected]) and Michele Reagan—(602) 926-5828 ([email protected]).  We have provided you with a link to the phone numbers and key bullet points below.

Here is a link to a directory of legislators in the Arizona Senate and House:

http://www.azleg.gov/

Here are some key points which help to emphasize the adverse impact this funding problem will likely have on customer service at the ACC:

• On average 4,700 corporations and limited liability companies are formed each month
• If the Legislature does not act to remedy the situation by September 30, 2009, those citizens wishing to start a business — businesses that employ people, pay taxes, buy property and provide products and services to the people of Arizona — will more than likely see a huge increase in processing turnaround times — by several weeks — by the end of October. 
• As each month goes by, and if no legislative action is taken, processing turnaround times will continue to grow exponentially and the work queue of documents waiting to be examined and approved will explode.
• If the Legislature waits until the next Regular Session in January to address the ACC funding issue the effect will be devastating, because it takes 90 days from the end of the session for legislation to become effective (absent an emergency clause or special session); this would mean the ACC would not have access to $2.8 million in anticipated revenue to fund its operations for the entire fiscal year.

Below is a copy of the press release the ACC sent out on this issue.

Once again, I encourage you to please call and email your legislators and to also let legislative leadership know how crucial this issue is to the people of Arizona.

If you have questions concerning this issue, you can reach me at 602-542-0776.

I want to thank you all in advance for your help on this issue.

As a legal assistant for a law firm that creates hundred of entities (limited liability companies “LLCs”) and corporations) each year, I receive quite a bit of correspondence addressed to our LLC and corporation clients in care of our office. I have become very familiar with the Arizona Corporation Commission (the “ACC”), Arizona’s agency that regulates LLCs and corporations, and the Arizona Secretary of State. I can recognize suspicious correspondence when I see it. Some scam correspondence is strikingly similar to that which is official, even to the trained eye, so it’s important that business owners be vigilant for suspicious official looking correspondence.

Only the ACC, Arizona Secretary of State, an Arizona County Assessor, the Internal Revenue Service and bona fide government agencies send notices regarding your Arizona entity.   Beware of  correspondence that looks too much like a government form sent by an outfit  of which you have never heard that asks you to send money.  If you are not sure an official looking notice is  legitimate, spend some time to investigate and  identify the sender of the correspondence.

Do a Google search for the name of the sender, its phone number and address.  Try to find the sender’s website.  If the sender does not have a website that contains real substance, think twice before sending money to the sender.  Contact the sender directly to verify that it did indeed send the correspondence.   See this article on our website for more information on large-scale scams targeting Arizona entities as well as a joint statement by Arizona attorney general Terry Goddard and the ACC.

Arizona entity owners should beware of the following characteristics of scammers and their correspondence:

1. Scammers produce very official-looking notices or invoices.  Remember, the only reason for sending correspondence nearly identical to that which is authoritative is to deliberately deceive or mislead company owners.  If these pieces of correspondence were simply notices, offers or legitimate marketing attempts with no intent of deception, they would not imitate official authoritative correspondence by attempting to utilize its language, layout and color scheme;
2. Scammers will ask for money or confidential information.  Let’s get this straight – they’re not giving out courtesy compliance notices!  They want company owners to pay for a product or service that they may or may not provide, or use the information obtained for their own purposes.  Even if one of these parties does provide the product or service promised, many times the service they provide is over priced or even worse – not required by Arizona law, as is implied by the correspondence;
3. Most scams or misleading correspondence can be traced to a P.O. Box or other type of mailbox whose owner is difficult or impossible to determine;
4. Many of these notices contain vague or unverifiable claims (“Included is a $17,000 “We Pay the Fine” Reimbursement Guarantee”);   urgent due dates; “file” or “corporation” numbers;  conflicting, confusing or missing information (several contact addresses, no actual distributing entity name) and even excerpts from the Arizona Revised Statutes in an apparent effort to confuse, legitimize or intimidate;
5. The fact that these parties have your company name, file number and address means nothing.  All Arizona entities must provide certain information to the ACC, which is then displayed on the ACC’s website where is may be seen by anyone with internet access.  Scammers routinely check the ACC website to build their mailing lists, much like they do with new homeowner information found on the Maricopa County Recorder’s website.

The bottom line is beware of any correspondence with these characteristics and read each piece of correspondence carefully before paying money or providing information to the sender.

If you receive a notice specifically claiming that some sort of action is required to keep your Arizona entity from being terminated or dissolved, call the ACC at 602-542-3026 to check on the standing of your LLC or corporation and deal directly only with the ACC or your business attorney to ensure reinstatement of your entity if necessary.