As the end of the year approaches, and the New Year looms, this is a good time to take stock of this year’s company actions, and anticipate next year’s company needs.
First, a quick review of the most basic “corporate formalities” that every LLC and corporation should be following on a day to day basis. Â These are the basic housekeeping actions that protect a company’s limited liability protection, hopefully preventing the “piercing of the corporate veil” in the event of a lawsuit.
1. Separate bank accounts for the company – separate and independent from the individuals that own, operate or otherwise transact business with the company.
2. No co-mingling of company funds with personal funds – any payments between the company and those that own, operate or otherwise do business with the company must go through proper company channels, through “arms length” transactions (fair to the company, and not one-sided to the individual).
3. Separate accounting and bookkeeping records for the company – essentially an extension of 1 and 2 above. It’s a separate legal entity. Treat it as such on paper and in reality.
4. Authorize company actions through Members or the Board of Directors – schedule and give notice for meetings for important matters, and review the Operating Agreement or Bylaws as to any annual activities that such documents may require – annual meeting required of the Members, the Board of Directors and/or the Stockholders.
5. Keep corporate minutes of actions by the Members or Board – keep them in your Company Book, with other appropriate important documents.
6. Act in the best interest of the company/Members/Shareholders, and not in favor of one or a few.
These are the broad strokes of maintaing corporate formalities. Easily done, but very important.
In the New Year, also consider the following needs, requirements or deadlines to start the year off right:
– Company Annual Statement / Statement of Information due to the Secretary of State’s office?
– Tax compliance? State, Federal, Franchise, Payroll, County or City Taxes due, or Business Licenses needing to be renewed?
– Notification required of annual meeting of Members, Directors, or Shareholders? Planning needed for such meetings, and with ample time to issue the required notices?
– Election or re-election of company officers?
– Insurance review? Are the coverages in place still the right kinds of coverages considering the past year’s activity and upcoming plans? Are the coverage limits still appropriate, or too much or too little?
– Update any emergency or disaster planning?
– Update or review any technology backup systems, and in relation to emergency or disaster planning updates?
These are but a few considerations that every company should review with the turn of the calendar year.
Many of these matters may be “lawyer” activities, and I welcome the opportunity to assist if needed.
Happy Holidays, and a Happy and Prosperous New Year !