Forming a corporation is a necessary, yet daunting, endeavor. After the corporation is established and shares sold, owners return to the daily tasks of running the business. Daily running of a business is quite different from the proper handling of a new corporation.

The formalities of running a corporation properly must not be ignored. Your failure to comply with documentation to validate elections and major tax related decisions can prohibit you from claiming primary tax deductions. If you ignore the corporation's duties, you are in fact ignoring its existence and the court just might follow suit. If your corporation status is ignored by the court you could personally be held liable for any and all suits, debts, and responsibilities you assumed were the burden of the corporation. Add to this the bad memories of directors and shareholders. Without a written, timely record of agreements and decisions, basic corporation requirements, key players in this corporate game can forget where there allegiances lay at strategic times. This is a common cause of controversy in well run corporations; don't feel you are immune to it.

Make it an absolute priority to record minutes. It will enable you to track important decisions and the votes that implemented them. A quick reading can instantly diffuse an intense situation. Your strategy will inhibit those who exploit middle of the road changes with bad memory excuses. Your minutes will attest to your adherence to corporation guidelines, protecting your status and keeping the natives peaceful.

You need not track every day transactions which are considered routine. However, you must record every single event which requires approval from shareholders or the board of directors.

Your board of directors should be involved in all pertinent decisions regarding taxes, legal issues, and finances. What are pertinent issues? Those involving the issuance of stock, proceedings of annual meetings, those of directors and of shareholders, real property purchases, long term leases, large loans or extensions of credit, implementation of retirement plans, and large state and federal tax elections to name a few. When these and other decisions are properly documented in a corporate manner, you will have sufficient paperwork to support any questions or investigations from state, federal or internal locations.

The most compelling motivations for documenting minutes and obtaining written votes and consents of key decisions include:

• Laws of the state usually demand a yearly corporate meeting. If you ignore the laws surrounding corporation status, the protective limited liability laws of corporate status will be ignored by the court.
• Your trail of paper will provide you with legal documentation and records of important transactions performed by your corporation. Documentation of this nature can be used to prove due diligence in complying with all regulations should you be accused of improper conduct by a higher or lower entity.
• Formal documentation can be distributed to shareholders to keep them informed on the important decisions taking place within the corporation.
• Directors in small type corporations promote and vote for transactions which will improve their financial holdings. Minutes and written consent paperwork will prove or disprove whether self-profiting decisions were achieved in a fair manner or not, by disclosing full details to all parties involved.
• Financial and property management service institutions often require copies of shareholder or board resolutions which approve the action to be executed.

For more information on forming a corporation or LLC for your business or for complete details on other helpful business and personal legal services, please do not hesitate to email us at info@adanaslaw.com, call us toll-free at 877-420-4600, or contact us online. Be sure to request your FREE Informative Newsletter and Business Start Up Check List!