Glossary: Corporate Formalities

Corporate Formalities

Corporate Formalities - Like the name implies, Corporate Formalities are formal actions that must be performed in order to maintain the protection that a corporation provides to personal assets of its directors, officers and shareholders. As part of these corporate formalities, you must maintain your corporate funds separate and apart from your personal funds, hold annual and, as needed, special Board of Directors' meetings and shareholders' meetings to approve transactions entered into by your corporation, write and maintain adequate corporate minutes of the meetings (or written consents in lieu of the meetings), execute and maintain written agreements of transactions such as real estate leases, insider loans, executive employment agreements and benefit plans entered into by the corporation. Failure to observe corporate formalities helps the creditors, other plaintiffs and the IRS to pierce the veil during a lawsuit or an IRS audit, rendering your personal assets at risk.

Disclaimer: The foregoing is intended to provide general information and may not be suitable in specific instances. The glossary information is not intended to be exhaustive, but rather to illustrate typical considerations. The material is provided with the understanding that it is not legal, accounting, tax or any other professional advice.

Copyright © 2003-2010 LawVantage.com, LLC. All rights reserved.
Important LawVantage.com, LLC and its website, CorporateBoardMinutes.com, do not render any legal, accounting or other consulting advice.
For legal advice, you should always consult with a qualified attorney-at-law.

Website development by

Vine Design.