5 Things You Must Do to Maintain Your Corporate Entity in the Eyes of the Courts

If you’re incorporating in CA, here is how you can maintain your corporation’s legal status.

Incorporating in CA

If you are incorporating in CA, you may need to know how you can move through the process while maintaining your corporate entity. Because corporations are seen as separate entities unto themselves, they can operate in some limited capacities much like individuals do.

Corporations can buy and sell property, commit crimes, be taxed, and be contracted. Incorporating your business is also an effective way to shield your personal assets from liability in the event of legal action against the company. However, a corporation can only be considered such if it is created properly; failure to do so will potentially lead to loss of revenue, personal liability in legal issues, and even open yourself up to federal and state penalties.

Many corporations and LLCs in California are improperly formed and, therefore, are not recognized, leaving them vulnerable to legal and liability issues. In light of that, how do you avoid those headaches and ensure your corporation is both created and running correctly?

These five steps are vital for any business incorporating in the state of California:

1. File the appropriate paperwork with your state.

When you make the decision to incorporate, you will need to contact the office of the Secretary of State for the state in which you wish to incorporate. They will provide you with the forms you will need to fill out to incorporate, as well as educate you on fees and other necessities.

2. Maintain a separation between yourself and the business.

It’s important not to allow your personal identity to commingle with your corporation. If you do and the corporation is ever involved in a legal dispute, your opponent can “pierce the corporate veil,” which can potentially open you up to personal liability should they choose to go after your personal assets to settle debts and obligations.

3. Draft minutes.

Every time you, your fellow shareholders, and any other directors meet, those meetings should be documented. Everything discussed in these meetings should be clearly documented, including proposed changes and finalized decisions.

4. Document all changes.

Incorporating in CAIf and when changes are made in the corporation, those changes must be meticulously documented and accounted for. It doesn’t matter if you are the sole proprietor or you share ownership with several other people; any and all major decisions should be made by formal resolution and recorded appropriately.

5. Keep meticulous financial records.

One major area where corporations get into trouble is with their finances. However, keeping track of financial information can prove to be another time-consuming task on top of running the business. It would be in your best interests to hire an accounting firm to handle your corporation’s financial records.

Because it can be difficult to keep up on the myriad of documents and responsibilities involved with a corporation, hiring a professional service can be a tremendous help. Most accounting services will store your corporation’s records for you automatically, eliminating the need for you to keep tabs on important forms, reports, and other documents. You can then easily retrieve those documents if they are ever requested by a government agency or a legal professional.

At Incompass, we know keeping track of the requirements for incorporation can complicate day-to-day operations of your company. That’s why we’re here to guide you through the process and provide the professional support you need. Contact us today!

 

Categories: CORPORATIONS & LLCs.