Small Business Attorneys Dallas TX

You’re hot to trot with an idea for a fabulous new business. You remember a horror story about the “entrepreneur who didn’t incorporate,” who got sued, and lost all her personal assets.

Determined that won’t be you, you click onto BizFilings and form a corporation. You lean back in your office chair, take a deep breath, and feel mighty satisfied with yourself. You’re protected.

Right?

Not exactly. There’s more to it than the initial filing for a corporation (or limited liability company). Incorporating is only the first step. Once you get the liability protection “shield,” you have to make sure you keep it.

You Are Not Your Corporation

Your corporation has an independent existence that can, literally, outlive you. It has needs separate and apart from yours (such as a need to be able to pay its own bills). If you don’t treat the corporation properly as an independent "being," the privilege of shielding yourself and limiting your personal liability can be taken away from you.

To keep that liability “shield” in place, a corporation needs to observe certain formalities and take certain actions. These "formalities" include:

• Issuing stock
• Electing officers and directors
• Keeping corporate records
• Adequately capitalizing the corporation
• Keeping personal and corporate funds separate

When a corporation doesn't do these things, the corporation’s limited liability shield can be pierced by creditors . . . who can then go after your personal pockets.

Mighty Minutes

That’s where corporate minutes come in. Yes, it’s paperwork and seems stupidly formal, but a corporation must officially authorize its officers and directors to make major decisions on its behalf. And yes, this includes single-owner corporations, too. How do you know that a corporation has given authority? Because there are written minutes of a meeting, kept in the corporation's books!

What's Major? What's Ordinary?

Does this mean you have to write down every time you go to Staples for pencils? Certainly not! Here's a general rule: if the transaction is part of your regular course of business, it does not need to be documented. So Shelly, who is an executive coach, does not need to write up corporate minutes each time he signs an agreement with a new client. Or Natalie, a bookstore owner, does not need to write up minutes for each sale of a book off her shelves.

The corollary: transactions outside the ordinary course of business do need to be documented. Often, they are one-time (or only occasional) transactions. So Shelly’s paying $10,000 to create a website for his coaching business is not “in the ordinary course.” The website is not Shelly’s core business; coaching is. Similarly, Natalie’s hiring a contractor to renovate the store and put up bookshelves is not “in the ordinary course.”

What are other examples of major decisions or transactions?

• Leases for, or subleases of, the business premises
• Significant contracts (ofte...