Observing Corporate Formalities – Why Bother?

One of the most dangerous trends in business law today is the proliferation of quickie-incorporation companies.

They promise to incorporate your business in California, Nevada, or any other state, for $99 or so.

These companies get away with this by simply filing an Articles of Incorporation with the State, and then handing you a cookie-cutter bylaws for you to complete on your own.

However, filing the Articles of Incorporation is merely the first step in the Incorporation process.

It is important that you create a viable business entity, one that is separate and distinct from yourself, or you will have wasted both time and money.

The danger in this kind of quickie-incorporation is that business owners think their assets will be protected if someone takes them to court.

However, if your corporate form has not been respected (i.e. you have not kept proper minutes for annual shareholder meetings, money transfers back and forth between your business and personal accounts without proper paperwork),  a court is likely to “pierce the corporate veil”.

In essence, the Court will say: “Since you have not treated this as a separate entity, neither will we!”

If the court pierces your corporate veil, then your personal assets and life’s savings may be reached to satisfy any judgment against you.

Indeed, you will be as bad off as if you had done nothing at all.  In addition, you will be out your $99.

Don’t be fooled by the quickie-incorporation schemes.

Incorporate your business properly with qualified legal counsel, and sleep peacefully at night!