Most small business owners are aware that it is preferable to operate your business as a corporation, an LLC, or an LLP rather than as an individual, because doing so shields your personal assets from business creditors. However, many business owners that I have met with did not know that in order to maintain this liability protection, they are required to do more than simply file articles of incorporation. In fact, your corporate liability shield will only be effective so long as your corporation continues to maintain certain corporate formalities throughout its operation.
Since we generally recommend S-Corps rather than LLCs or LLPs (for more information, read our article: LLCs and S-Corps: Selecting a Corporate Form for Your Small Business), I will limit this discussion to the corporate formalities required for S-Corps.
Do not be intimidated by the procedures listed below. You should be aware of these formalities, because you are the person ultimately responsible for following them; however, your attorney should guide you through this process and should handle most of the procedural work.
You and your attorney should work together to ensure that your corporation follows the following procedures:
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