Run your business safely!

If incorporating was your first step to a new and safe way to do business, compliance with the law is the easiest way to keep you safe from any liability associated with they way you manage your company. Let’s talk about this important topic.

Failure to follow corporate formalities may expose corporate officers, directors and shareholders to personal liability. Maintaining good records, including corporate minutes, on a timely basis goes a long way toward maintaining the limited liability benefit of a corporation.

If incorporating was your first step to a new and safe way to do business, compliance with the law is the easiest way to keep you safe from any liability associated with they way you manage your company.

There are many reasons to pay attention to the formalities associated with running a corporation: Business Corporation laws require that articles of incorporation and bylaws be filed. In addition, other events must be recorded in the company’s record books.Articles of incorporation and bylaws serve as a contract between the corporation and its shareholders, obligating the corporation to act in accordance with them.

Directors and officers owe the corporation and shareholders a fiduciary duty to use good faith, exercise due care, and act in the best interest of the corporation. Majority shareholders must act in good faith, in a manner not calculated to oppress the rights of minority shareholders. Corporate formality must be respected and observed to preserve the integrity of the corporation; as well as to shield officers, directors, and shareholders or related businesses from personal liability.

Don’t think that due to the fact that you could be the only person holding all the positions of a corporation you are safe from keeping your company in compliance. Small companies also have duties with State Agencies, providers and even customers.

Why Are Minutes So Important

It’s the law. There is nothing clearer than that. Minutes are legal records that serve to document actions and support business decisions, made by the principals of the business throughout the year. Minutes help you to separate your own affairs from the company’s actions. It is the way to protect you from liability.

During an IRS audit a privately held company may be required to produce the minutes of the company. If they do not, or can not give the minutes to the IRS agent, the problems stand as found. There is no negotiation with the IRS. State law requires corporations to prepare annual minutes and in many cases; failure to do so has contributed to piercing of the company veil resulting in exposure to the principals.

As mentioned, without current and complete minutes, corporate players could be held personally liable for the actions of the corporation.

Protect Yourself

Your legal protection could be in jeopardy if a creditor successfully pierces the corporate veil due to the corporation’s failure to keep minutes.
Good recordkeeping habits and paying attention to detail are necessary for any successful business. Now you know it.

* Robert Neuberger is founder and President of Active Filings LLC. Active Filings provides incorporation services in all 50 States and Washington DC.
You have permission to publish this article electronically or in print, free of charge, as long as the resource box at bottom is included.

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9 Ways to Choose the Right Incorporation Company

So you have taken the first step to opening your business and you have decided to make it a Corporation or Limited Liability Company. There are many companies out there that offer incorporation services, so how do you know which one is the right one for you and your business? These nine steps will help you make an informed decision about the incorporation company you choose, so you can avoid the pitfalls of incorporating with the wrong one.

1) If you build it they will come

Just because an incorporation company has a web site doesn’t mean that it is a legitimate business entity. There are many “incorporate.com” companies online that are simply that, a web site. You should thoroughly research the company you are thinking about using to incorporate your business to make sure they are a formal business entity (corporation or LLC). You can investigate a company by contacting the Better Business Bureau and State Attorney’s Office where the business is physically located to find out if any complaints have been filed against them. You can even go as far as to look up their business license to verify that it is current. Business licenses can be verified with the state in which the business is operating.

2) Business affiliations

Businesses like to place their business affiliations and organization membership logos on their website and other marketing material. Often times this helps to relax potential customers because it makes customers feel like they are working with a legitimate company. It is very important that you take these memberships at face value and dig a little deeper to verify that this company is actually a member of these organizations.

For example, when you see the Better Business Bureau logo on a web site, you probably breathe a sigh of relief. Take a few minutes to contact the Better Business Bureau via phone or online to verify the company’s membership status and to make sure that there haven’t been any complaints filed against them. It will take only a few minutes of your time and can save you a huge headache in the long-run.

Many organizations have stringent guidelines that a company must adhere to in order to become a member. For example, the local chapter of the Chamber of Commerce may require that the company provide a copy of their business license and occupational license, in order to ensure the company is a legally operating entity. These types of procedures are for the protection of the consumer, so utilize the public information available to you and verify everything!


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