Maintaining Corporate Status with Corporate Minutes

Maintaining Corporate Status with Corporate Minutes

All corporations should keep minutes of their meetings throughout the year, but at a minimum  once  a  year  in  order  to  protect  their  corporate  structure  and  for  planning purposes, both for the corporation's business and tax planning scenarios. 

 

One of the primary business reasons for making sure that the corporation is conducting business as a separate legal entity is to keep the individuals from being liable for corporate actions.  Often referred to as  "piercing the corporate veil", if the corporation does not "act" like a separate entity and co-mingles personal and business assets, fails to keep proper books and records (including corporate minutes) it is sometimes likely a court could say that the company was just a "sham" or a "fraud".  A court would look beyond the "legal form" to the substance or reality of the situation.

In the United States, corporate veil piercing is the most litigated issue in corporate law. Corporations exist in part to shield the personal assets of shareholders from personal liability for the debts or actions of a corporation. Unlike a general partnership or sole proprietorship in which the owner could be held responsible for all the debts of the corporation, a corporation traditionally limited the personal liability of the shareholders.

Factors the courts may consider for piercing the corporate veil:        

It is important to note that not all of these factors need to be met in order for the court to pierce the corporate veil. Further, some courts might find that one factor is so compelling in a particular case that it will find the shareholders personally liable. For example, many large corporations do not pay dividends, without any suggestion of corporate impropriety, but particularly for a small or close corporation the failure to pay dividends may suggest financial impropriety.

For both business and tax-effective corporate minutes, consider the following:

Some of the above information was obtained from Wikipedia.  We will address minute or LLCs, General Partnerships and Sole Proprietorships in a future article.

Source: 1.  Wikipedia contributors. "Piercing the corporate veil." Wikipedia, The Free Encyclopedia., Web., 9 Sept 2017 and 15 Feb. 2010

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