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Saturday, October 1, 2011

Are You Ignoring Corporate Formalities?

I ask this question knowing with a fair amount of certainty that most business owners would either answer with a definitive "Yes", or would simply respond with a blank stare confirming that they don't fully understand what Corporate Formalities are (much less why they are so important).

  • I felt compelled to focus my latest blog post on this subject matter after a recent discussion with one of my trusted attorney contacts. The attorney was sharing with me yet another story of a business owner in crisis due to the piercing of his Corporate Veil . What made this story truly sad is that if the business owner had simply observed Corporate Formalities, the catastrophe that followed would most likely have been avoided. My attorney friend and I were in agreement that it is imperative that business owners understand what Corporate Formalities are and why they are so important.
  • I have replayed that conversation muttiple times over the past few days which confirmed that I simply cannot focus enough on the education process surrounding these Corporate Formalities. I think most people understand that one of the most important reason to formalize your business entity is to create a protective layer between the business and personal assets of the shareholder, so it is perplexing to me that the idea of maintaining the integrity of that Corporate Shield is rarely given a second thought.
  • The bottom line is this: observing Corporate Formalities is paramount in preserving the Corporate Veil and maintaining the layer of separation between your business and personal activities and assets. If you are unaware, or simply unwilling to take these steps, then the formation of your entity was a complete wast of your time and money.

If you are a typical business owner, I'm sure that you already have a full plate with overseeing the day to day operations of your business. However, I would encourage you to give some thought to Corporate Formalities and the role that they play in fully protecting your business. If you have been ignoring them, consider changing your practices. If you don't fully understand them in the first place, consider contacting me to learn more...

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