Go Legal Yourself!. Kelly Bagla

compliance steps you must take in order for you and your company to enjoy limited liability protection under the law. Corporate compliance includes you treating your incorporated entity as completely separate from yourself. In most cases, you may only be one person running the company, but the law requires you to treat the company as if it is a completely separate entity from you. Moreover, failure to file required paperwork can lead to fines and penalties, including suspension of your incorporated entity.

The corporate compliance paperwork is key to keeping your company in good standing with the state where your company is incorporated. If your business is sued, the person suing may try to show the court that you have not maintained your business to the letter of the law, thus “piercing the corporate veil” and attaching your personal assets as part of a judgment. Piercing the corporate veil refers to a circumstance in which courts set aside limited liability protection and hold a company's owner personally liable for the organization's activities or debts. While the laws vary from state to state, courts will generally abstain from piercing the corporate veil unless there have been signs of serious misconduct.

      Below is a general overview of what you should to do to keep your business in compliance with the law. Of course, specific requirements will vary based on your business type and location:

      1 File an annual report: Most states require some sort of annual report filing on the anniversary of your incorporation date.

      2 File amendments for any changes: If you make major changes to your corporation, you may need to keep your state up to date with filing Articles of Amendment. Examples of change include changes to the company name, changes to the registered agent, changes to the business address, an increase in the number of authorized shares, and changes in business activities.

      3 Keep up to date with any meeting minutes: If your business is a Corporation, you'll need to record meeting minutes whenever you hold a corporate meeting. The bare minimum requirement regarding meeting minutes are the annual minutes, which appoint directors and officers.

      4 File a DBA for any name variations: A lot of times, a business has an official name and then uses any number of variants of that name or in some cases uses different names to do business. In these cases, you should file a DBA (Doing Business As) with the county where you do business for each name used.

      5 Get an EIN: You must obtain a Federal Tax Identification number, also known as an Employer Identification Number (EIN). An EIN is a unique nine-digit number that is as important for your company as a social security number is important for you personally. An EIN is used to open a bank account, register your company with various agencies, and file company taxes, and is required by clients who pay for your products or services.

      6 Separate bank accounts: You will need to open a separate bank account for your incorporated entity that has its own checks and its own credit cards. This action separates your personal money from your business money and prevents any commingling. Having a separate business account will make it easier for you to manage your business and show separation from personal assets, thus proof of a separate entity existence for your business. Additionally, this action will allow your incorporated entity to start creating its own credit rather than using your personal credit.

      7 Use full legal name: The name of the corporation should be used in full, including “Inc.” or “LLC,” on all contracts, invoices, and documents used by your company. This clearly indicates the existence of the incorporated entity as a separate entity.

      8 Use your title: Always use your title, such as President, Chief Executive Officer, or Secretary, when signing on behalf of your incorporated entity, as using the name of the corporation and your title further creates separation from you as an individual. Furthermore, if you were going to get sued, generally, by using your title, the person or entity suing you can only sue you as a corporate officer and not you as an individual person.

Key Takeaways

       When starting out, it is important to determine what form of business structure will work best for your specific situation. Choosing the best legal structure for your business requires knowledge of your line of work and understanding of local, state, and federal laws. The legal structure you choose for your business is one of the most important decisions you will make in your startup process. Your choice of structure can greatly affect the way you run your business, impacting everything from liability and taxes to control over the company.

       When deciding to set up a new entity for your startup, you should consider your startup's financial needs, risk, and the ability to grow. Take into consideration these factors when choosing the legal structure for your business and always consult with your accountant, as these structures have very different tax implications.

       Once your company is incorporated, the limited liability protection afforded by the incorporation process is NOT automatic, meaning once you incorporate your business, your personal assets are not automatically protected from lawsuits. Ninety percent of business owners think they can now enjoy the limited liability protection afforded to them by their incorporated entity. Incorporated entities do not automatically become barriers between your personal assets and your business assets whereby your personal assets are protected from lawsuits.