Maintain Corporate Records: Using Pseudonyms? Orange County Business Lawyer

Written by: Andrew Gale - Orange County - Small Business Attorney

 

Orange County Small Business Lawyer Question #2332Q

Can I use a Pseudonym in my corporate records for my California S corporation corporate records?

I formed a corporation by myself and I am the only shareholder, officer, or director of the corporation.

The state requires that I be listed as an officer of the corporation on the annual Corporation report filed with the Secretary of State which is a public document.

I am a publicly recognized person that has led to a rash of threats of lawsuits (which I think are completely frivolous).

Because you are a publicly recognized person, it tends to lead people to think that you are a person with deep pockets and have the money to pay off any kind of crazy lawsuits.

I was wondering if I could use a pseudonym, instead of my legal name, when I file the Statement of Information cried which requires the name of an officer or director to be listed in the document.

What do you think?

Orange County Small Business Lawyer Answer#2332A

I must admit, I have been practicing law for 30 years and I have never run across this particular question before today.

I think the problem with the analysis for you is that this is a corporation owned by you where you are presumably the sole director and shareholder.

In this type of situation, the various duties and responsibilities of each particular position as it relates to the Corporation get a bit murky. It is common for people to think, in this situation, that they own the corporation and therefore they should be able to do whatever they want.

It may help you a bit to think about it a different way.

What if you had made a large investment in this company. You then hired a board of directors who then hired a 3rd person to be president of the Corporation.

Let’s say that the president came before a meeting of the shareholders and directors, and stated that he wanted to use a false name in place of his legal name when signing corporate documents including those to be filed with the state government. How would you feel about that?

My guess is that you immediately object to that notion because the president would be perpetrating a fraud on the state. Not to mention, anyone else who subsequently relied on that public record.

Consequently, I would tell you that I would not recommend that you do it

Furthermore, I would guess that if you look at the fine print immediately above the signature line on the Corporation Annual Report, you will probably find some language to the effect that you are signing this document under penalty of perjury certifying the truth of the information contained in it.

Once you file this document, it becomes a matter of public record.

Now imagine yourself in a situation later on where the corporation has been sued for breach of contract wherein the complaining party alleges that there is been fraud in the transaction.

I would think that any sharp lawyer in Illinois would carefully review all of the publicly filed corporate documents and quickly realize that you had filed documents using a false name.

I would bet that this document, and your testimony relating to the filing of the document, would likely be a foundational piece of evidence in a successful prosecution against the company because of a recurring case of fraud.

You need to remember that the corporation is not you.

It is a separate entity and you have a fiduciary duty to the corporation to act in the best interests of the company. Most states apply the doctrine called the business judgment rule that protects officers and directors with respect to decisions they make on behalf of the corporation.

Were mismanagement is the heart of the case, the presumption that officers and directors of a corporation make decisions on an informed basis, in good faith with the best interest of the Corporation at heart may go right out the window.

I think you have several better options

 

1. First, if you are concerned about lawsuits, have the corporation buy an insurance policy for general business liability and another for “errors and omissions” that will specifically protect the officers and directors.
2. Secondly, hire someone else to be the president of your company.
3. Third, go through the process to change your name legally.