Corporate records is not the most exciting subject in the world. Many people don't want to bother with corporate records, and many people don't, until it's too late. When an auditor comes knocking, business liability has people trying to get behind the “corporate veil” or internal problems shine a light on the corporate records, it can be a nightmare if they aren't in order.

The Drendel & Jansons Law Group provides corporate record maintenance for many dozens of corporations and LLCs from year to year for a flat fee. We also provide ongoing support and consultation for the business owners to guide them in maintaining the formalities of corporations and LLCs that are necessary to avoid personal liability for business obligations.

Keeping corporate or LLC records in order is just one aspect of observing the formalities that will protect you from the liabilities of your business. We go beyond the process of maintaining records to educate business clients to avoid unnecessary liability.

Corporate/LLC Record Maintenance

A corporation operates as a liability shield for the owners (shareholders) because a corporation is considered its own “person” in the law. A corporation is considered its own legal entity capable of entering into contracts, incurring liabilities and making profits (so we hope). The shareholders are only at risk for the capital they put into the corporation in exchange for their stock – if they do things right.

A corporation only protects the owners (shareholders) from the liabilities of a business if the shareholders observe the formalities of doing business as a corporation. Merely incorporating a business is not enough to provide protection; the business must operate like a corporation to be treated like one. Since a corporation is considered separate, and distinct from its shareholders, a corporation must “act” separate and distinct from its shareholders. This is true whether the corporation is IBM or Joe Smith Incorporated.

The Business Corporation Act provides the basic process by which all corporations must act. Shareholders elect Directors. Directors appoint officers. Officers run the day to day business, which includes making routine decisions, signing checks and so on. When the president of a corporation signs a document, it is not intended to be a document binding on the person who is the president; the document is intended to be signed by the president on behalf of (as a representative of) the corporation and binds the corporation. The same principles apply in slightly different ways with LLCs. 

The process of electing directors and appointing officers should take place every year, according to the Business Corporation Act. The election of Directors is done at an annual shareholders' meeting. The appointment of Officers is done at an annual Directors' meeting. This must be done even when there is only one shareholder who is also the only director and the only officer. If the business is incorporated, the business must operate like a corporation.

if the owner of the business that is incorporated does not operate the business like a corporation, however, courts will ignore the corporate shell and hold the owner liable for the business debts and liabilities. If the IRS audits and finds that a corporate business hasn't been treated like a corporate business, the tax consequences could prove onerous. 

Regardless of the size of a corporation, the corporate formalities must be respected and corporate records must be kept demonstrating that the formalities have been observed. The burden is on the shareholders to prove the business has been operated according to the proper formalities. We help make sure a shareholder or LLC member never has to worry about the mundane formalities of corporate or LLC structure.

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