When operating a business, owners and investors often choose to form a corporation due to the liability protection and tax planning opportunities available after incorporation. While incorporation is a very important step in that process, there are many requirements after the initial filing, adoption of bylaws and other steps in forming a corporation that are required to maintain the separate existence of your new entity and take full advantage of doing business as a corporation.
Directors, shareholders and officers must comply with certain formalities to receive the full benefits of doing business as a corporation. Failure to comply with annual state filings can result in a corporation being suspended which can prevent the corporation from defending itself in litigation, receiving financing, and validly issuing stock and could even result in the corporation losing its right to use its own name.
In addition, corporations are required to hold regular meetings of the shareholders and regular meetings of the board of directors. At least annually, the shareholders must meet to elect directors and consider other business of the corporation. The directors of the corporation typically meet soon after being elected to consider significant business planning and elect officers to manage the day to day operations of the corporation. During both types of meetings, the corporation's secretary (or a shareholder elected to serve as secretary), should record votes taken so that a review of the corporation's minute book would show that shareholders were allowed to vote and that directors satisfied their fiduciary duties and exercised their business judgment in managing the corporation.
The minimum requirements outlined above seem deceptively simple, but a busy corporation can often overlook the important annual filings or required shareholder and director meetings. Fortunately for a corporation, the required shareholder and director meetings can also provide important opportunities to improve a business. At these meetings, owners and managers discuss and analyze many facets of a business and with the advice of the corporation's attorney and accountant, these meetings can be a tool to improving operations and profitability.
Because these corporate formalities can be used to help clients maximize their assets and opportunities, HMS Law Group LLP offers a corporate maintenance program, which includes assisting in staying up to date on annual recordkeeping and filing requirements, providing a forum for annual meetings, and delivering affordable related corporate services. If you are concerned with meeting annual maintenance requirements and taking advantage of annual meetings to not only preserve your corporation but to improve your business, please contact us.