How to use corporate formalities to keep your corporate liability shield in place

Corporate Attorney’s Use Formalities To Keep The Corporate Liability Shield

Corporations are one of the most widely used business entities because they provide advantages, such as limited liability, to their owners. However, in order for a corporation to maintain those advantages, the owners need to follow certain corporate formalities, often with the help of corporate counsel. The courts have identified corporate formalities as actions that business owners should take in order to maintain their business’s status as a separate legal entity.

One of the corporate formalities that should be followed is for the Board of Directors to hold an annual meeting. Further board or shareholder meetings may be required when certain decisions are to be made. During these meetings, corporate minute book should be kept. This book should contain an accurate account of meetings held by the board of directors or shareholders.

To maintain the liability advantages of having a corporation, corporate funds must not be intermingled with the personal funds of the corporate owners. A corporation should have its own bank accounts separate from those of the directors or shareholders, and records should be kept showing where the money is and how it is used. If funds are intermingled, a court may find that the business is not a corporation, but simply an alter-ego of the business owner. That means that the business owner could be held personally liable for the corporation’s debts.
In order for a business to maintain the privilege of being a corporation, these corporate formalities, and others, must be followed. Practiced corporate lawyers at Gunderson, Denton & Peterson, PC are experienced in creating corporations and can help you establish and following the appropriate procedures to ensure that you and your business will be protected.

The corporate attorneys at Gunderson, Denton & Peterson, P.C. are experienced with matters relating to General Business and corporate formalities.