Bullet Proofing Your Corporation

Corporate Bylaws Form - Bullet Proofing Your Corporation

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Many small business owners are well aware of the importance and benefits of incorporation. If properly formed and operated, a corporation shields its shareholders from personal liability. While many small business owners seek legal counsel to support them with formation of their corporation, they may not understand the benefits of having continuing legal counsel to support with the carrying out of their corporation, specifically the importance of maintaining corporate formalities. Failure to draft and profess documents connected to the carrying out of your corporation may subject the corporation to fines from state agencies, civil liability, and, at worst, the quality of courts to disregard the corporate form and make shareholders personally liable for debts of the corporation. Though you may believe that your business is a small, inexpressive business which does not need to succeed the rules for large, group companies, the law does not make exceptions, only subtle distinctions that your attorney can expound to you.

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Corporate Bylaws Form

Upon the formation of your corporation, you must submit Articles of Incorporation to the Secretary of State. The Articles of Incorporation must have exact clauses by law. If you have a closely-held corporation, you must comprise further clauses specified by law. No corporation may issue shares until the Articles are beloved by the Commissioner of Corporations. Your corporation must also draft and adopt bylaws, laying out the rules adopted by the corporation for its internal governance. Annually, a corporation must file a Statement of data with the Secretary of the State to remain in good standing. Prior to issuing any stock, even a so-called "private" business must whether register the stock with the department of Corporations or ask an exemption. Your attorney can support you with filing for the allowable exemption to ensure your stock is properly authorized and issued, even if you alone or with your spouse are the only shareholders. Your attorney may even be able to properly exempt shares previously issued improperly. Corporations must also hold shareholder meetings annually, and must keep minutes of such meetings. Corporate decisions must be documented and ratified, whether by director meetings or by resolutions by directors passed by unanimous written consent. allowable consideration must be given for all meetings, as specified in the bylaws. Your attorney can support you in ensuring you profess the allowable minutes and resolutions for all corporate decisions.

A corporation must profess allowable accounting records and shareholder records. Even a turn in the name of one of the shareholders, or for example, a change of title from your personal name to the name of your Revocable Living Trust, must be properly documented in the corporate records book. Failure to Comply Can Harm You Failure to comply with the above formalities can subject you to monetary fines, personal liability, or even loss of operate over your business. If you do not annually file the Statement of data with the state, the Franchise Tax Board may impose fines on your corporation. Failure to file for two consecutive years could lead the Secretary of State to suspend your corporate rights, powers and privileges. Failure to properly separate the affairs of your corporation and personal affairs may also allow a court to resolve that the shareholders of a corporation are personally liable for corporate debts, which would eliminate one of the major benefits of the corporate form. A court may take into inventory a estimate of factors before making a determination, among them commingling corporate and personal funds, rehabilitation of corporate assets as personal assets, failure to derive authority to issue stock or improperly issued stock, failure to profess minutes or enough corporate records, and disregard of legal formalities among connected entities.

Keeping good records and tight operate over the corporation is especially leading if you have business partners. Your business partner may take actions on behalf of the corporations which you may not be aware of if you do not profess exact operate over corporate activities by complying with the above rules. The actions taken by partners may lead to corporate or even personal liability. Furthermore, disputes amongst business partners can quickly escalate into very expensive litigation. Many of these disputes arise in corporations where actions taken by directors and/or officers are not properly documented, and one party may take benefit over the lax oversight of corporate affairs. Maintaining perfect corporate records and retaining knowledgeable corporate counsel can save you sizable litigation expenses and fines, and supply invaluable stress relief!

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