Keeping Corporate Records
While not usually an issue for larger and more established corporations, deficiencies in corporate recordkeeping create frequent problems for small and newly-formed corporations. It is quite easy for novice board members, shareholders and officers to view corporate meetings as mere formality — and to some extent they are. But it is these formalities that lend legitimacy to corporations and allow them to enjoy the benefits of incorporation. It is the records of these meetings that can help avoid internal disputes when important corporate business is transacted.
Many do-it-yourself document companies tout how easy it is to form your own corporation. But unlike an experienced Washington, DC business lawyer would, they do not tell you about the ongoing requirements of maintaining an active corporation. Corporations in the District of Columbia, as well as those in most other states in the U.S., must comply with certain corporate formalities.
- Maintaining a board of directors
- Holding periodic director and shareholder meetings
- Keeping a written record of those meetings
- Maintaining separate bank accounts
Failing to fulfill these formalities can bring about the piercing of the corporate veil and allow creditors and others to bypass the corporate persona and assert liability directly against the shareholders or incorporators.
Keeping records of these proceedings is an important part of proving that they actually occurred — and that the business is actually active and not simply a shell or alter ego for another person or enterprise. Written minutes should be taken at every meeting and should identify:
- The place and time of the meeting
- How and when notice of the meeting was given
- The people who were present
- The business transacted
- The tally and result of votes taken
This not only shows that your corporation is a legitimate enterprise but also removes any doubt as to what transpired for members or shareholders who were not present or those who were present but later dispute that a given event occurred.
