The Importance Of Annual Corporate
Have you heard about the legal theory of "piercing the corporate veil" to make
the shareholders the alter ego of the corporation so that the shareholders
themselves will be personally liable for its debts?
There is such a theory!
There are mistakes that inexperienced or ill-informed people can make causing
shareholders to become personally liable for their corporation's debts. That's
something you definitely want to avoid. One of the main reasons many people
incorporate is to protect their personal assets. How can you begin to prepare to
Comply with Corporate Formalities!
A very important corporate formality is holding annual meetings of shareholders
and directors and having written minutes of those meetings prepared and filed in
your corporate minute book. When there is only one shareholder, or one director
a meeting, of course, cannot take place. In these circumstances the annual
written action of the sole shareholder or the sole director should be prepared
and placed in the corporate minute book.
If your corporation keeps annual written minutes, or the annual written action
of the sole shareholder or director, as the case may be, you will have gone a
long way in complying with corporate formalities. To be sure, this is not, in
and of itself, a guarantee that your corporate veil cannot be pierced. However,
if you are careful about this, and are well informed, you will probably be
careful and well informed about other corporate formalities thus helping you to
avoid becoming personally liable for your corporation's debts.