What is Corporate Compliance?
In general there are three requirements to keep your business entity out of hot water. They are:
- Annual Reports
- Corporate Minutes
- Registered Agent
Do you need Corporate Compliance Service? Click here to use the corporate compliance analyzer to find out.
Annual Reports
More and more states have mandated electronic filing for annual reports. Although this is good for the state, it is not good for companies that must track when to file documents. Failure to file your annual report can result in loss of good standing and this can result in:
- Penalties and fines
- Any contracts that favor the corporation being voided
- Loss of business name
- Inability to be recognized by a court of law, resulting in a summary judgment against the corporation
Corporate Minutes
Although corporate minutes are not filed at any state agency, they do present compelling evidence that a corporation is not a 'shell' corporation. Only business entities that engage in the formalities required of a corporation provide liability protection to those inside the corporation. Failure to maintain adequate corporate minutes can result in loss of the legal protections afforded to a corporation. This is known as 'piercing the corporate veil'. Once the veil of the corporation has been pierced officers, directors and even shareholders can become targets as they have unlimited liability. Minutes are also valuable as they codify events within the corporation creating a chain of historical events.
Although there is not a legal requirement that LLC's maintain corporate books, it is a valuable tool in showing that the LLC engages in the formalities of business and maintains a written record of events of the business.
Registered Agent
A registered agent is the person who receives critical legal documents such as subpoenas, summons and notices. Having a knowledgeable registered agent is critical, as you do not want to accept documents that are not properly served.
A corporate registered agent also prevents embarrassment from clients witnessing a process server and keeps your business matters private and out of the eyes of employees.
Considering the number of frivolous lawsuits filed each year no business can say they will never end up in a lawsuit. Many people view lawsuits as a way to "hit the lottery" and an easy source of cash at someone else's expense.
Is this important?
Yes! Piercing the corporate veil opens you up to unlimited liability. You have worked hard to build a business, shouldn't you work hard to protect it? With
80 -90% of corporations at risk you should ask yourself, am I?
Still unsure? Click here to read more about this topic.
