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Are Your Business Entity Books Up-To-Date? |
If your first question
is: "What is a business entity or corporate book?", you most likely have a problem. When you create a corporation or a limited liability company or other business entity, just
filing a document with the Secretary of States Office is not enough to fully protect you and your family. In addition
to placing your personal assets at risk, if your corporation is not properly set-up other problems can arise, like the loss
of your SubChapter S tax classification, a failure to properly update your Business Entity Book, a failure to properly treat
the Business Entity as a separate entity or a dispute between shareholders. If you have formed a Business Entity you need
to ask the following questions:
• Have you dealt
with the Business Entity documents after the Articles of Incorporation and/or Articles of Organization were filed with the
Secretary of State's Office?
• Do you have By-Laws, Operating Agreement, and/or Member Control Agreement?
• Have you had annual Business Entity meetings with minutes of the meetings
filed in your Business Entity book?
• Have you had meetings to make business decisions that are reflected in minutes and resolutions
authorizing the Business Entity decision (i.e., to buy, sell, borrow, etc.)?
• Do you have a Buy/Sell agreement to deal with if one of the owners wants
to sell or dies?; - Do you have a Business Entity Book where all of the initial organizational documents, the minutes, resolutions and
changes in ownership have been organized?
If you don't have the above documents or if you are not doing the above you run the risk that if
the Business Entity is sued that the court will “pierce the corporate veil” and allow the other side to pursue
you and your assets directly. In other words, the court can disregard your Business Entity and allow the lawsuit to proceed
directly against you and your personal assets if you don’t properly run the Business Entity as a separate entity.
If you don't know the answers to any of the above questions
or if any of you answers are no, you need to have your corporate documents reviewed.
Whether it you need to have your corporate book reviewed and/or updated, Nash & Lodge can help
you. You took the first set to form a business entity, now make sure that it is effective and contact an attorney at Nash & Lodge. |
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Dangers of Not Having Up-To-Date Corporate
Books
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Many
business owners created a business entity for the business - a corporation or an LLC; however, they failed to follow the proper
corporate procedures while running their business. No business meetings, no minutes of meetings and no resolutions approving
the actions of the business entity. Following corporate procedures is not difficult; however, many business owners don't
realize how important it is. If the corporate formalities are not followed, you take the risk of losing
the liability protection that your business entity was designed to give you. In these troubled economic times, you do
not want the creditors of the business to be able to go after your personal assets. If the corporate formalities are not followed,
the potential for disputes between the owners increase and each is vulnerable because the rules were not followed.
Was money that was put into the business a capital contribution or a loan? If it is a loan, what are the terms of the
loan? By following the business rules and documenting the same in your corporate book avoids misunderstandings, helps
when trying to enforcing the rules and prevents creditors of the business from going after the assets of the individual owners of the business. If you
want a Nash & Lodge attorney to review your corporate books today to see if they have been properly kept up, please click here. |
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