The following thought has crossed the mind of almost every owner of a small corporation at one time or another:
“How important is it to keep all of those detailed corporate records? After all, we’re a small corporation and all of our shareholders are involved in every decision even though most are made on the go, not at formal meetings. We can’t find time for official meetings and recording minutes – we’ve got our hands full just running the business…”
Be careful! What so many of us would agree seems unimportant could indeed become painfully important. After all, the primary reason most business owners choose to incorporate is to gain the limited liability protection offered by corporations. Following the rules and regulations is a price that must be paid because that benefit can be lost if a court finds that the corporation’s principals have not operated the business as though it were a corporation and are therefore not entitled to the limited liability protection. This concept is called “piercing the corporate veil”.
This very serious risk must be eliminated by diligently following your state requirements regarding the organization and operation of corporations. Holding corporate meetings and keeping minutes, documents and records are important steps in creating evidence that all of the required formalities have been followed.
Your corporate book is the place to keep all records regarding the organization and operation of the corporation. You can quickly access important information as well as proof that your corporation has been operated properly.
You should make every effort to maintain a strong “corporate veil”. Here’s a checklist that may help you make certain your corporate records are in order:
MaxFilings offers kits that include many things to help you maintain a strong “corporate veil” by complying with state rules and regulations concerning documentation and record keeping. Included is a metal seal used to make an official impression to identify the company on official documents.
If you run a limited liability company (LLC), don’t think you’re getting off too lightly here. Though not required to comply with all of the strict rules and regulations that states apply to corporations, it is still important to hold periodic meetings and maintain accurate records.