Corporate Formalities: Stay Operationally Sound, Legally Compliant, and Protected from Personal Liability
January 24, 2018
By Cory Howes
No matter your entity type, there are certain corporate formalities you must keep to comply with North Carolina law each year. Keeping your books in order, along with other requirements, will keep you operationally sound and protected when interested parties need to verify the integrity of your business.
Corporate formalities, in essence, help relevant authorities (the State of North Carolina, the Internal Revenue Service) see that your entity is, in fact, a going concern and not merely synonymous with your personal activities. Different entity types have different requirements under state law. For example, if your company is a traditional “C-corp” corporation, here’s a handy list of formalities you’ll need for state compliance:
- A list of shareholders (and option-holders)
- Meeting minutes from annual meetings and any periodic shareholder meetings
- Records of company stock issuance
- Records of company officers
You’ll also need to keep current records of company financials, details of major transactions, employment contracts, tax forms, and records of any payments. Keeping a comprehensive set of corporate formalities in check will prevent you from accidentally “piercing your corporate veil,” in effect destroying one of the main reasons for setting up corporate entities—protecting yourself from personal liability in your business dealings.
Many small business owners are quite busy with the day-to-day operations of their companies. Most small business owners wear many hats, but many neglect their corporate formalities, which can be severely problematic when it comes to tax matters, litigation, or creditor claims. While everyone admires a good work ethic, government agencies and judges have little sympathy for those who aren’t serious about maintaining the integrity of their corporate entities.
At the Forrest Firm, many of our clients take advantage of our Corporate Shield™ Service, through which we help with certain aspects of a company’s corporate formalities. For our Corporate Shield clients, the firm serves as registered agent in North Carolina (and will manage registered agents in other states, if necessary). We also file the company’s annual report in North Carolina as well as required annual filings in other states, and prepare annual minutes for the company to document business activity and appoint officers, directors, managers, etc. as appropriate. We also provide periodic reminders and checklists to help small business owners stay on top of managing their business.
If you have questions about our Corporate Shield™ Service or would like information about the full scope of services offered, please do not hesitate to contact me.
IMPORTANT NOTE: Some small business owners have historically relied on their accountant to file their annual report in North Carolina along with the company’s taxes. Due to a recent change in North Carolina law, this is no longer allowed.