What law prohibits a govt. entity from using LLC, LTD, INC, etc?

[CuriousCO]

Jurisdiction

Colorado

Hello! Hopefully this will be quick:
What Colorado and/or Federal statute(s) prohibits a govt. entity from having a corporate suffix like "Colorado Department of Revenue LLC", "Larimer County Incorporated", or "City of Denver Enterprises"?

I can't find a C.R.S. that prohibits the use of corporate identifiers in the legal entity names of state and local governments.

 

[army judge]

Your question intuitively answers itself.

 

[adjusterjack]

I can't find a C.R.S. that prohibits the use of corporate identifiers in the legal entity names of state and local governments.

You aren't going to find any laws anywhere that does that.

What you will find, however, are laws addressing the use of artificial entities and who may use them. The use of artificial entities are limited to whoever is listed. Anybody or anything not listed (like a government agency) is, ergo, not permitted to use an artificial entity.

Let me simplify that for you.

A law says that only A, B, and C can make widgets. D comes along and says "Where does it say that I can't make widgets?" Well, it doesn't specify that D can't make widgets, and it doesn't have to say it because restricting the making of widgets to only A, B, and C effectively locks D out of the making of widgets.

 

[flyingron]

Even if you could legally create a name like that, I can't think of any way of using it that would constitute criminal fraud on your part.

 

[Zigner]

Hello! Hopefully this will be quick:
What Colorado and/or Federal statute(s) prohibits a govt. entity from having a corporate suffix like "Colorado Department of Revenue LLC", "Larimer County Incorporated", or "City of Denver Enterprises"?

I can't find a C.R.S. that prohibits the use of corporate identifiers in the legal entity names of state and local governments.

Why? What issue has arisen that causes you to ask this question?

 

[zddoodah]

This post reminds me of a situation that arose back when I was a paralegal before I went to law school. A friend had been sued by his former employer, a corporation. The lawsuit alleged, among other things, a cause of action for intentional infliction of emotional distress, and I was talking with one of the lawyers I worked with about the case. I mentioned that I had looked but couldn't find any authority that a corporation couldn't recover emotional distress damages. She said, "of course there's no authority, because it's completely stupid."

Now...as it turns out, there actually is authority that says a corporation can't recover emotional distress damages, but the judge who wrote the opinion took basically the same approach as the lawyer I talked with.

I'll leave it to you to figure out why this post reminds me of that situation.

Why? What issue has arisen that causes you to ask this question?

Good question.

 

[PayrollHRGuy]

You will also find that state laws regulate how cities are incorporated. The Feds have nothing to do with it.

 

[CuriousCO]

Your question intuitively answers itself.

Logic would suggest. However...

Why? What issue has arisen that causes you to ask this question?

I am one of the new Directors of a 17 year old local government entity that has an LLC suffix at the end of its name. We are trying to figure out how the name was approved by a Court and subsequenty made it all the way through to formation and then years of budget filings without anyone noticing. I'd like to cite rules or laws that should have prevented it. But if there is no law preventing it, and a Court didn't have a problem with it, then I guess the name is legit. Regardless, we recently renamed the entity via District Court, dropping the improper suffix.

You aren't going to find any laws anywhere that does that.

What you will find, however, are laws addressing the use of artificial entities and who may use them. The use of artificial entities are limited to whoever is listed. Anybody or anything not listed (like a government agency) is, ergo, not permitted to use an artificial entity.

Can you point me in the right direction to the aforementioned laws addressing this matter?

Even if you could legally create a name like that, I can't think of any way of using it that would constitute criminal fraud on your part.

Can you clarify: Would or wouldn't constitute fraud on someone's part?
If you meant "Wouldn't", then ... Bingo!
It also seems a little fishy that our entity's EIN# issuance letter from the IRS (CP 575 D) instructs the applicant to begin filing annual Form 1065s. 1065s are for Partnership entities with pass-thru income tax rules, not local govt. entities.

 

[adjusterjack]

I am one of the new Directors of a 17 year old local government entity that has an LLC suffix at the end of its name.

Name your government entity as it appears on official documents with the LLC after it.

I doubt if anybody here can guess what happened without knowing the name.

You're welcome to check your state's records if you aren't going to reveal the name.

 

[CuriousCO]

Name your government entity as it appears on official documents with the LLC after it.

I doubt if anybody here can guess what happened without knowing the name.

You're welcome to check your state's records if you aren't going to reveal the name.

Oh trust me, I have boxes and boxes of records from 2002-2021 with the "Entity, LLC" name all over it, including letters to it from the Office of the State Auditor and Division of Local Govt. approving annual Applications for Exemption from Audit and Budget reports. I even have certified copies of the original 2006 Court Petition and subsequent Decree that formed the District. And of course, certified copies of the new Board's own Petition and subsequent Court Decree dropping the LLC suffix in December 2021. I personally recorded said Decree with the County Clerk, Assesor, and CO Division of Local Government pursuant to 32-1-105 C.R.S.

I know you may find it hard to believe, but I assure you there is a Colorado Special District created pursuant to Title 32 (Special District Act) that had an LLC suffix in its legal entity name from 2006-2021, and now it doesn't.

 

[adjusterjack]

If you are asking can it happen. The answer, obviously, is yes, because it did happen.

If you are asking if it was legal, well, apparently not since a judge ordered the removal of LLC.

If you are asking how it happened, I wouldn't care to speculate without knowing the name of the entity. You apparently have paperwork implying that whatever bureacrat approved should have known that it shouldn't have been an LLC.

Now that the LLC is removed, why are you even bothering with this?

 

[CuriousCO]

If you are asking can it happen. The answer, obviously, is yes, because it did happen.

If you are asking if it was legal, well, apparently not since a judge ordered the removal of LLC.

If you are asking how it happened, I wouldn't care to speculate without knowing the name of the entity. You apparently have paperwork implying that whatever bureacrat approved should have known that it shouldn't have been an LLC.

Now that the LLC is removed, why are you even bothering with this?

I was trying to ask what laws make the LLC suffix in the entity's name illegal. I would like to cite them in a letter I am writing.

Despite the LLC being removed, there's apparently still another entity filing paperwork with the SoS as a for-profit limited liability company, having our previous entity name; and the registered agent is the spouse of a former Director.

You're welcome to check your state's records if you aren't going to reveal the name.

I do want to reveal the name, but right now I'm not sure it would be wise. Much of the historical correspondence between prior Directors is alarming, So are the financial records which are vastly different than the ones on file with the State.

The new Board can't really afford legal counsel. Members had to pay out-of-pocket ($100 each) for our fidelity bonds, a new website/email, phone# and physical office space rental, plus the fees to open a new bank account for the entity... the prior Directors closed the old account shortly after we took office.

 

[Zigner]

You're going to need an attorney...really. Your association can't take any legal action without one.

 

[adjusterjack]

Writing a letter (citing statutes or not) is fine, as a notification device. If it doesn't stop the unwanted behavior you'll have to find the money to hire a lawyer and litigate.

Despite the LLC being removed, there's apparently still another entity filing paperwork with the SoS as a for-profit limited liability company, having our previous entity name; and the registered agent is the spouse of a former Director.

I'm still not getting it. Are you saying that your government entity dropped the LLC from its name and now some other entity is using the same name followed by LLC?

Is that "entity" also a government agency?

If not, I don't see why you would think it illegal to use the name.

Anyway, here's the entire Colorado statute regarding LLCs. Can't imagine why you haven't already found it.

Colorado Limited Liability Companies Laws - 2020 Colorado Revised Statutes Title 7, Article 80 - Limited Liability Companies :: 2020 Colorado Revised Statutes :: US Codes and Statutes :: US Law :: Justia

If there is nothing in there expressly or impliedly prohibiting the use of a name that happens to be the same as a government agency, then you'll have to find other grounds to object to it.

Example: There is a town in Colorado called Castle Rock, a government "entity" right?

While I couldn't find a Castle Rock, LLC, I did find a Castle Rock, Inc listed on the SoS business search. ID # 20218021538.

If you were employed by the town of Castle Rock you would be looking for a law that prohibits Castle Rock, Inc from using Castle Rock in its business name. Is that what this is all about?

Because if it's not, then you'll need to find a better way of explaining what's happening (including the name).

If you can't do that then there is nothing more we can do for you here and I suggest you take your issue (whatever it may be) to an attorney.

 

[CuriousCO]

There's no money, $2500 is what we've got to work with. There are 17 years worth of old records to review! I believe the District Court's DA will have the final say whether this gets investigated or not. I am compiling all the old District records now. Looks like it's been the same board of directors for 17 years, two of the five have never lived in this state and have no voter record on file with the SoS!

 

[Zigner]

There's no money, $2500 is what we've got to work with.

No money = no attorney.

You're spitting into the wind.

 

[CuriousCO]

So there is NO way for a Board of Directors of a local govt. entity to ask the District Attorney from the Court that created the District to investigate, without first hiring their own attorney to make contact with the DA?

Eventually, this District will either have to dissolve or consolidate with another one, because it provides the municipal drinking water for a housing development. Dissolution of this District requires Court supervision and voter approval. Consolidation with another District also requires Court supervision, and approval of voters from both Districts.
Colorado Revised Statutes Title 32. Special Districts § 32-1-602 | FindLaw

 

[army judge]

So there is NO way for a Board of Directors of a local govt. entity to ask the District Attorney from the Court that created the District to investigate, without first hiring their own attorney to make contact with the DA?

Working with the county attorney, county prosecutor, even the state attorney General MIGHT be an option.

Why not ask any of those officials, in lieu of private, anonymous, internet nobodies????

 

[CuriousCO]

As a fellow internet nobody, I can say it isn't easy getting the attention of "officials" even when you wave verifiable proof in their faces. There's always a bigger bone with more meat on it for them. That is how this situation ended up being allowed to persist for 17 years in the first place. The voters were deceived, unaware, or in many cases apathetic; while the officials and regulators were far too lenient -- and dismissive of the voters who did try to raise red flags.

The CBI or AG could opt to take interest in this matter, but they seem to have better things to do. However, the DA appears to be taking a bit of interest recently. I'd venture a guess that 32-1-905(2.5) is rarely exercised, and that Name Changes aren't common either, especially one removing the same "LLC" the Court previously decreed 17 years ago. All five seats were vacated by the BoCC for a mix of 32-1-905(1)a, b, d, g, and h. Maybe those three details flagged us for attention.

Talking about this reminds me of a question I have about 905(2.5): "The board appointed pursuant to this subsection (2.5) shall call for nominations for a special election within six months after their appointment, which special election is to be held in accordance with the provisions of section 32-1-305.5..."

That passage sparked a disagreement between the State and an attorney. Toward the end of 2021, the State suggested to the board that the only Call is what's due within six months, and to consider syncing the (2.5) special election to the March '22 regular election, so as not to expend resources on an "extra" election. The attorney wanted us to play it safe, interpreting (2.5) to mean that the election must be done within six months, not merely the Call. We decided to play it safe to avoid blowing the reorg (32-1-305.5) and re-triggering (2.5) or a statutory dissolution. We did the proper publications and Call, and of course got fewer self-noms than seats, since only a handful of others seem to understand what is going on, and thus we canceled the election. Waste of $$, unfortunately. I voted against the "extra" election knowing it would be canceled anyway.

Was it better to have the election, or would it have been better to cancel it?

Another question: Is there any way for us to verify whether a prior board member is a US Citizen? I have reason to believe that one, who made payments to themself and their company, isn't. It seems like kind of a taboo subject to bring up.

 

[Tax Counsel]

Another question: Is there any way for us to verify whether a prior board member is a US Citizen?

You can ask the person about his/her citizenship. It is not illegal to have a foreign person as a board member of a corporation or LLC, though, so I'm curious why you need that information.