It is common for people who start a new business to create a new corporation or limited liability company when the new business venture is created. This process begins by filing “Articles” with the Indiana Secretary of State’s office, providing basic information regarding the company’s owners, legal address(es), and registered agent’s contact information, and paying an initial filing fee. This is a process that is now done online.
The next step in the process is to obtain an Employer Identification Number (EIN) from the Internal Revenue Service (IRS), which is a number assigned to the business for tax purposes, much like how individuals are assigned a social security number. There are different ways that a company can elect to be categorized for tax purposes—and there are some pros and cons to the various types of elections. The business’s initial tax election is then designated to the IRS by preparing and submitting the appropriate form(s).
Initial set up is not the end point.
This is the point in the process where many—if not most—small business owners stop, and they do nothing further, aside from filing tax returns and paying taxes.
Clients generally do not realize that there are several other important legal documents which should be prepared for your company. This is often where an attorney steps in because additional expertise is needed to ensure that a business and its owners are properly protected.
What are the standard corporate documents for a business?
The basic corporate documents consist of an either bylaws or an operating agreement, organizational minutes, subscription agreements, and stock/unit certificates. These items are often kept by the business owner (or sometimes with their attorney) in an official corporate record book or a tabbed binder. This book or binder should be reviewed and updated annually with the preparation of annual minutes, consents, transfers, and any other corporate documents as needed.
Why do I need corporate documents?
You’ve likely heard the term “piercing the corporate veil.” In reality, if your business is not set up legally—and properly—it means that your personal assets may not be protected if your business is ever sued or subject to a judgment or other liabilities. The corporate documents are a crucial part of a business being “set up properly and legally” to avoid someone being able to “pierce the corporate veil” of your business. If your business is set up properly, you can likely protect yourself and your personal assets from judgments or liabilities levied against your business and escape personal liability. Isn’t that one of the most important reasons why you set up the company in the first place?
What if I don’t have corporate documents?
If you set up your business yourself online, but do not have the proper corporate documents created and an issue should arise—you may be putting yourself, your personal assets, and your financial situation at risk. Even your home! This is not a risk worth taking for any business owner and it is entirely avoidable. Ensuring that your business was—or now is—set up properly can help you avoid this risk.
Further, if you do not keep up with annual reporting and payment of fees, your company could be administratively dissolved for noncompliance.
While no one enjoys paying a lawyer for legal services, there are times when it is critical, beneficial, and necessary. The set-up of your business is a BIG step. Make sure you do it right and keep it right!
Whether you already have an established entity and want to make sure that all your business affairs are in order, or you are considering starting a new business—talking to an experienced business attorney today could save you a lot of time, risk, expenditures, and potential heartache tomorrow.
Call us today at (317) 269-3500, so you can rest easy tonight knowing that your business is compliant and you are individually protected.
We have “nice” attorneys with the experience you need, and we love helping businesses—big and small. We are also happy to assist you with the review of contracts, negotiation of leases, or other important legal matters related to your business. Let one of our experienced attorneys help you to help your business—and in turn, yourself.
Contact us today!