Appendix G. Bullet-Proofing Your Corporation

AuthorJeffrey Robert Matsen
ProfessionFounder and managing partner of Matsen Voorhees Mintz LLP
Bullet-Proong Your
Many small business owners are well aware of the importance and benefits of incorporation. If properly
formed and operated, a corporation shields its shareholders from personal liability.
While many small business owners seek legal counsel to assist them with formation of their corpora-
tion, they may not understand the benefits of having continuing legal counsel to assist with the operation
of their corporation—specifically the importance of maintaining corporate formalities. Failure to draft
and maintain documents related to the operation of your corporation may subject the corporation to fines
from state agencies, civil liability, and, at worst, the ability of courts to disregard the corporate form and
make shareholders personally liable for debts of the corporation.
Though you may believe that your business is a small, private company that does not need to follow
the rules for large, public companies, the law does not make exceptions—only subtle distinctions that
your attorney can explain to you.
What Is Required?
Upon the formation of your corporation, you must submit Articles of Incorporation to the Secretary
of State in your domicile. The Articles of Incorporation must have specific clauses by law. If you have a
closely held corporation, you must include additional clauses specified by law. No corporation may is-
sue shares until the Articles are approved by the Commissioner of Corporations. Your corporation must
also draft and adopt bylaws, laying out the rules adopted by the corporation for its internal governance.

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