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.
There are three main aspects associated with annual corporate maintenance: annual meetings, keeping minutes, and filing annual reports. This article will address each of these items of corporate document maintenance and why they are crucial.
The first part of corporate maintenance is holding an annual meeting. At the annual meeting things like company changes and organizational issues for the year will be discussed. This is also where the new directors will be chosen, as well as the new officers. In a bit of an oversimplification, this is where the shareholders will have the opportunity to hear what is going on with the corporation and will have a chance to give feedback as to how the corporation is being run and what direction it will be heading for the next year. All states require corporations to hold annual meetings and failing to do so can cause the corporate veil to be pierced.
It is during the annual meeting that minutes come into play. This is no more than taking notes of what is discussed and what decisions are made so there is a record of what is going on with the corporation during meetings. Additionally, if there are other meetings that are conducted throughout the year, then records should be kept of these as well. Minutes do not need to be kept for routine and day-to-day decision making, but they should be kept for any meetings where decisions are being made that require the approval of the board of directors or the shareholders.
One final aspect of corporate maintenance is the annual report that is filed with the secretary of state. Each state will differ on exactly what they require. Most states will require similar core elements to be included in the annual report such as: name of the corporation, address of the registered agent and/or main business office, names, titles, and business addresses of its principal officers, and the names and business addresses of its directors. Other things that may need to be included are the purpose of the corporation, number of vacancies on the board (if any), or the date of incorporation.
All of these things are needed in order to make sure that a corporation remains in good standing with the state. Failure to follow these requirements can needlessly expose shareholders and corporate owners to the liabilities of the business. Having someone to help guide a corporation through this annual process and to help offer reminders to meet these requirements can take away some added stress. MyCorporation can help make sure your corporation stays in good standing. Call us today and ask what we can do for you.
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