This is the third post in my series on starting a new business in San Bernardino, California. My last article discussed choosing the right corporate structure for your company. It is important to understand that choosing the wrong structure can have an impact on liability and taxation. In this article I will discuss another important topic – maintaining your corporate protection after you have started your new enterprise.
San Bernardino businesses can lose corporate protection if they fail to follow formalities
Protection from liability is a great benefit of starting a separate entity. An LLC, S- Corp, or a C- Corp allow their owners/shareholders to avoid personal liability in a lawsuit. It is important to understand, however, that formalities must be followed in order for this protection to be maintained. Failing to properly renew your entity’s state registration each year, or to follow other formalities, can result in a temporary loss of protection. Transactions entered into while your company is in such a state may result in personal liability for the owners.
Say, for example, you fail to pay the annual minimum tax for your LLC. You realize that you failed to pay the renewal and you get everything up to date thirty days later. During that thirty day gap your state company will be considered to not have good standing; you may face personal liability for transactions entered into while it was not in good standing. As another example, you may have forgotten to record your annual minutes for your Corporation. If involved in a lawsuit, then the Plaintiff may use that against you to hold each shareholder personally liable for the alleged debt or injury. By timely filing all documents, maintaining corporate records, and promptly paying all fees, you ensure that such issues do not arise. Unfortunately, such mistakes can occur in our area given that San Bernardino is a hotbed of startup activity.
A business law attorney can help San Bernardino businesses maintain corporate protection by following formalities
One of the best ways to ensure that your business maintains its corporate protection is to retain the services of a business law attorney. Having counsel to assist you with formation, filings, and other issues helps to ensure that formalities are followed while you focus on the most important thing – your business. Contact our office today to speak with a San Bernardino business law attorney.
I also service Rancho Cucamonga, Fontana, Ontario, Victorville, Rialto, Hesperia, Chino, Upland, Apple Valley, Redlands, Highland, Colton, Yucaipa, Montclair, elsewhere in the Inland Empire, as well as Los Angeles.