If a lawsuit arises due to improperly maintained corporate 60% of small corporations are unable to protect their owners.
Owning corporations offers their owners many obvious advantages and benefits, chief among which is limited liability. However, for your business to be perceived as a legitimate corporation and for you to take full advantage of these advantages and benefits, certain formalities must be observed. Among the rules established for corporations that must be followed in accordance with the law are proper preparation and maintenance of records, as well as compliance with necessary procedures.
Record keeping is vital to all corporations. When
financial activities, all corporate minutes and contracts showing ownership and management information are required first and foremost. Failure to comply with certain requirements may cause your corporation to lose its limited liability status (“corporate veil tear”). If this happens, personal liability to tax agencies and creditors for failure to comply with the record keeping formalities may be imposed on the directors and shareholders of the corporation.
Corporation and LLC documents in the United States
Records, or business papers, of a corporation include the following types of documents:
- Articles of Incorporation.
This is the name given to the document which, when a corporation is formed, is subject to registration and retention in the prescribed manner. It sets forth the general purposes and objectives of the business for the corporation to be established, as well as the
The proposed structure of the corporation. Depending on how it is stated in the state statute of incorporation, the corporation is incorporated. - Corporate Minutes.
These are legal documents adopted by the corporation’s management during the year that document the corporation’s actions and decisions on business matters. The protocols serve as an important tool for establishing a legal separation between the owners of companies and the companies they own, thereby safeguarding the owners of the companies from being subject to corporate liability. The laws of all 50 states specify the need for shareholders to prepare and keep minutes. - Corporate Resolutions (Resolutions).
This is a written document describing an action taken by the board of directors of a corporation. For example, when a corporation issues stock as a dividend payment, the declaration of a dividend is a corporate resolution. - List of Officers.
This is a list containing the names and addresses of the directors and certain officers of the corporation and is to be filed annually and kept with the Secretary of the State.
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