Business Basics: Governance Documents

One of the most common questions we get here at MyCorporation about forming a limited liability company or corporation is, “How hard is it to actually run this type of business?” Running an LLC or corporation is very different than running a sole proprietorship, and the government will expect those running the business to adhere to certain rules. governance documentsIt should be noted that the only governance document need for Corporations and LLCs is an Articles of Incorporation or a Certificate of Organization. However, there are other types of governance documents that should be kept and maintained.

Articles of Incorporation and Certificates of Organization

In order to form a corporation, you have to file your articles of incorporation. And in order to form an LLC, you have to file what is normally called a certificate of organization. In both cases, these documents act a sort of birth certificate for the new business entity. They disclose the entity’s name, address, registered agent information, and the information of any managers or owners. A lot of states actually offer a “fill-in-the-blank” type of form on the website of their Secretary of State or department of corporations. However, these forms only meet the minimal requirements for a corporation or LLC as set by the state. They also don’t set the rules for how your company will actually be run. Along with these formation documents, you should consider drafting a set of bylaws or an operating agreement.

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Keeping Your Corporate Machine Running Smoothly

There are several parts to maintaining a corporation throughout the year in order to remain in compliance with the state.  Maintaining proper corporate documents is essential to running a successful corporation. Without it, the corporate veil may be pierced and the shareholders may be personally liable.  The corporate veil is the barrier that separates the corporate entity from the people who own the corporation.  This is what allows the corporation to be its own legal entity capable of buying property, suing, and being sued.  If this veil is pierced, then the separation between the corporate entity and the owners is destroyed and the individual owners of a corporation can be held responsible for all of the corporate liabilities.  The last thing any corporate shareholder wants is to be personally responsible for the liabilities, losses, and debts of a corporation. Continue reading

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