Search Site
Menu
So, How Important are Corporate Formalities Anyway?

Typically, one of the most prevailing reasons that a business owner decides to incorporate their business is to shield them from or limit their personal liability for the debts and obligations of the business. While this is an important first step, simply forming a corporation or a limited liability company is generally not enough to maintain maximum personal protection from business liability. Business owners who have incorporated or formed limited liability companies must also be diligent in maintaining the corporate formalities of their entity.  Failing to do so could result in a plaintiff attempting to “pierce the corporate veil” of the entity and hold the owner personally liable for the debts, obligations, or liabilities of the entity.   Maintaining the corporate formalities is equally as important (and quite possibly even more important) when the entity only has one owner.  It is not uncommon for single member LLCs or sole shareholder corporations, to become lax in the record keeping of the entity, particularly when there are not other owners holding either accountable for properly maintaining the entity’s records, policies, and procedures.  Though not an exhaustive list by any means, below are a few points that every owner of an entity should keep in mind when it comes to maintaining the corporate formalities of his or her entity:

  • Ensure that the entity was properly formed from the beginning and that all of the required governing documents (i.e. bylaws, company agreements, minutes or consent of organizational meeting, etc.) are present and fully executed
  • Hold annual meetings as required in the entity’s governing documents
  • Hold any officer, director, or manager meetings and elections as required in the entity’s governing documents
  • Hold special meetings as required in the entity’s governing documents when addressing critical entity matters
  • Maintain accurate and complete records and minutes of company meetings
  • Do not commingle company and personal funds
  • Do not use corporate accounts to pay for personal expenses and vice versa
  • Do not make loans to or take out loans from the company unless specifically permitted in the governing documents of the entity, and if permitted, only in strict compliance with the requirements of the governing documents.
  • Ensure that owner or entity’s CPA is timely filing any required state, federal, and local (if applicable) taxes and reports.
  • Maintain all records and corporate documents for the entity in the entity’s corporate book.

Eric R. Thiergood, Sr.

Phone: 281-367-1222

Fax: 281-210-1361

[email protected]

 

Leave a Reply

Your email address will not be published. Required fields are marked *

Contact a Dedicated Texas Business Lawyer To Schedule a Consultation
Call 281-367-1222 or contact us online to schedule a meeting.

Strong In Action

  • Spring 2019

    The Strong Firm represents borrower in $42.3 million HUD construction loan for multifamily real estate development in Walton County, Florida.

    Read More
  • Spring 2019

    The Strong Firm acts as legal counsel for borrower in $32.1 million HUD construction loan for multifamily real estate development in Conroe, Texas.

    Read More
  • Spring 2019

    The Strong Firm aids borrower in $31.7 million HUD construction loan for multifamily real estate development in Nueces County, Texas.

    Read More
  • Spring 2019

    The Strong Firm represents borrower in the refinancing of a $3.57 million commercial mortgage-backed security for a commercial office facility in Montgomery County, Texas.

    Read More
  1. 1
  2. 2
  3. 3
  4. 4
  5. 5
  • Peer Rated 2019 Award

Recent Blog Posts

Legislation Authorizes Paid Sick Leave for Workers Suffering from Coronavirus

New legislation passed in response to the COVID-19 pandemic allows certain workers to receive paid sick leave even if their employer previously did not provide it. In March, the federal government enacted the Families First Coronavirus Response Act (FFCRA). This law assists employers that give their employees paid time off
Read More
Legislation Authorizes Paid Sick Leave for Workers Suffering from Coronavirus

Lenders Suspend Home Foreclosures Due to COVID-19, But What Happens Next?

Many large financial institutions are suspending foreclosures because of the massive economic damage caused by COVID-19. Some banks have stopped proceedings indefinitely. Others have set time limits for foreclosure suspensions such as 60 or 90 days. Even as health and financial issues remain uncertain, this is a good time for
Read More
Lenders Suspend Home Foreclosures Due to COVID-19, But What Happens Next?

How Can I Create Estate Planning Documents During the Pandemic?

Even in its first few weeks, the COVID-19 pandemic caused many people to examine or reassess what is most important to them. The need to prepare in case of an emergency or untimely death has been highlighted by the tragic losses occurring around the country. What can you do if
Read More
How Can I Create Estate Planning Documents During the Pandemic?

Complying with Corporate Annual Meeting Requirements during the COVID-19 Quarantine

How do you hold a corporate annual meeting when the entire country is in lockdown? On the surface, it might seem like a simple matter of using a favorite video conferencing tool and perhaps checking to see if it’s been hacked. Annual meetings for corporations are more than get-togethers. They
Read More
Complying with Corporate Annual Meeting Requirements during the COVID-19 Quarantine
  • Video Vault


    Watch videos done by our legal team to gain a better understanding of your legal needs. Our lawyers give video insight into areas such as Real Estate, Business Law, Mergers & Acquisitions and much more.

Pay Retainer Online

Use our easy-to-use and secure online payment feature.
We accept all major credit cards.

Pay Your Retainer

Contact us

Quick Contact Form