A FEW WORDS ABOUT CORPORATE FORMALITIES
Any casual reader on the subject of running your own business is told about the importance of observing corporate formalities. What does this mean?
Creditors may be to ”pierce the corporate veil” and collect on you as a stockholder on corporate debts if you do not observe corporate formalities. Some of these would include, properly incorporating the company, obtaining a tax ID, and memorializing all corporate decisions in contemporaneous corporate minutes.
Another important part of corporate formalities is for the Corporation to have its own bank account, out of which all the expenses are paid and all revenues are received. Any loans to and from the Corporation should be memorialized by contemporaneous written documentation.
If you plan to have your company taxes an S corporation, there is an election in Europe the fallen time. There are numerous other elections related to income taxes which your public accountant can help you with. Paragraph maintaining good records not only helps you avoid individual liability for the corporation’s debts, it also helps you understand what the companies really doing, and prepares you for when you are ready to go public. Public companies are required to keep books and records in an orderly fashion. If you are not able to do that, or hire someone to do it, you won’t have success as a public company.