Q.How do I maintain my corporate limited liability protection?
A.One of the reasons you chose to incorporate is probably for the limited liability protection offered by the corporation. Unfortunately, merely forming a corporation will not ensure you "limited liability" protection.
Oftentimes, individuals use a legal service company or paralegal to form their corporation. Unfortunately, this often ends up in disaster because the individual not only fails to file all of the necessary paperwork (which often leads to heavy fines), but also fails to properly instruct the individual on how to properly maintain a corporation. Remember, a corporation is a separate legal entity.
In addition to having your corporate books reviewed by a licensed local attorney, you should:
- Display your complete corporate name (Corp., Inc., Corporation or Incorported) in your letterhead. This will alert those you do business with that you are in fact incorporated.
- Use your official corporate title on all corporate documents (Contracts, Letters, Memos, Email, Etc.). When you fail to indicate your title (President, Secretary, Treasurer, Director, etc..), the court may consider your individual signature as a personal guarantee thus subjecting you to personal liability.
- Never co-mingle personal and corporate bank or credit funds or assets. Never pay personal debts or personal expenses with corporate funds and never use corporate assets for personal use.
- Create and maintain corporate records and minutes on a continuing basis (monthly, quarterly, but at least annually). Failing to maintain corporate records may lead the IRS or a court to deny the corporation's existence.
- Keep your corporation in "Good Standing." File all of the required documents, pay all taxes including the annual franchise tax, and keep a registered agent for service of process.
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