DID YOU KNOW THAT AN ESTIMATED 90% OF ALL CORPORATIONS WOULD FAIL TO PROTECT THEIR OWNERS IN THE EVENT OF A LAWSUIT OR AN IRS AUDIT DUE TO INADEQUATE CORPORATE RECORDKEEPING!
This is the first installment in a three part series on how to maintain the protection of your corporation.
As a business owner you may be sitting on a personal liability time bomb! You may say “I’m not worried about that since I incorporated my business”. When you set up your corporation you did so with the expectation that you would have liability protection by creating a barrier between your personal and business worlds.
The problem is that many attorneys who form corporations fail to adequately inform their clients that simply forming a corporation does not give you benefits you think if you do not from that point on walk, talk and act like a corporation.
CALIFORNIA CORPORATIONS CODE §1500 STATES: “Each corporation shall keep adequate and correct books and records of account and shall keep minutes of the proceedings of its shareholders, board and committees of the board ...”
Are Your Personal Assets At Risk? Failure to maintain the proper corporate documentation makes it easy for creditors to pierce your corporate veil and hold YOU personally liable for any actions taken by the corporation.
This means that the Larry Parkers of the world could sue you and go after your HOME, BANK ACCOUNTS, CARS, and OTHER PERSONAL ASSETS to pay off their client’s judgments. Since the average person is sued 5 times during their lifetime, it is not a matter of if, but when, you will be sued!
Furthermore, the IRS could disallow certain business deductions making you subject to back taxes, penalties and interest, which can survive bankruptcy. In fact it has been reported that they have hired 16,000 new auditors to go after corporations!
So the question is: what exactly are my recordkeeping duties required by California law? We will address that question in our next installment.
To contact our office for assistance with your corporate record keeping, please call us at (949) 453-7979 or email us firstname.lastname@example.org. Our staff is standing by to help you.