Five Requirements to Maintain Your Company’s Corporate Status
A company may choose to incorporate for a variety of reasons. Obtaining corporate status provides several benefits, including limited liability for shareholders and officers. Safeguarding personal assets is one of the primary reasons that many people choose a corporation as their business entity. Unfortunately, many companies fail to take steps to ensure that they do not lose their corporate status.
Filing Articles of Incorporation and the required documents to obtain corporate status is just the first step in operating a corporation. If you fail to meet the requirements of maintaining corporate status, a creditor or other party could file a lawsuit seeking to pierce the corporate veil. If the judge grants the party’s request to pierce the corporate veil, shareholders and officers lose the personal liability protections that corporate status offers.
Therefore, it is extremely important that you follow through with all requirements to maintain your corporate status. Consulting with an Oklahoma corporate attorney regarding the ongoing requirements for maintaining your corporate status can avoid costly problems in the future.
- Requirement to Conduct Meetings
A corporation is required to conduct annual meetings for corporate shareholders and periodic meetings for corporate directors. During an annual shareholders meeting, the shareholders vote on various matters such as electing directors, amending bylaws, approving mergers, or approving the sale of corporate assets. During a meeting of the directors, corporate officers are elected, approve salaries, issue stock, and authorize loan agreements.
- Document All Meetings
In addition to the requirement to hold meetings, you are required to carefully document the business conducted at the meeting and the decisions made in the meeting. You must have a careful and detailed record of the meetings that are available for review. If your company is audited by a government agency or the corporate status is challenged, the minutes of these meetings can help maintain the corporate status.
- Maintain Detailed Financial Records
In most cases, a corporation should use a double-entry bookkeeping system for its financial records. This form of bookkeeping ensures that all corporate financial transactions are accurately recorded and tracked. Therefore, any financial transaction of the corporation should be entered as both a debit and a credit.
- File Separate Tax Returns
Corporations are required to file separate tax returns and pay corporate taxes on earnings. Even if you are the sole shareholder of the corporation, you must file a corporate tax return to maintain your corporate status. The corporation issues tax documents to shareholders to be used when they file their personal tax returns. However, filing corporate tax returns can be confusing. C-Corporations and S-Corporations are taxed differently. If you are unsure about corporate tax requirements, you should consult with your Oklahoma corporate attorney and tax professional.
- Maintain Separation From the Corporation
Directors, officers, and shareholders must not mix their personal finances and business decisions with corporate matters. When signing documents for the corporation, officers and directors should execute the document in the name of the corporation. For example, if the corporation is obtaining a loan, the directors should sign the loan documents as directors of the corporation. If directors sign loan documents in their individual name, they could be held personally liable for the debt. Likewise, all leases, contracts, and other corporate documents should be executed in the same manner. Working with an Oklahoma corporate attorney can help avoid mistakes that could result in personal liability for the corporate directors.
Additional State Requirements to Maintain Corporate Status
In addition to the five requirements above, corporations organized and existing in Oklahoma are governed by Oklahoma laws. Therefore, state laws dictate several requirements for maintaining your corporate status. Some of the state requirements to maintain corporate status include but are not limited to:
- Maintain corporate records at the company’s principal location, including names and addresses of all shareholders, distribution of shares, a stock transfer ledger, and records of accounts.
- File an Annual Report and Franchise Tax Return with the State Tax Commission each year by July 1.
Maintain all business licenses and permits required by law.
- Working with our Oklahoma corporate attorney ensures that you comply with all federal and state requirements to obtain and maintain corporate status. Setting up a corporation can be overwhelming. Our law firm handles the required paperwork and walks you through the process of incorporation so that you can focus on building your business.
Contact Davis Business Law to speak to an Oklahoma Corporate Attorney for more information.
Do not leave anything to chance when you set up your business. Careful planning in the beginning stages of a business can help you save money and prevent problems in the future. Davis Business Law has offices located in Yukon, Enid, and Tulsa, Oklahoma as well as in and Wichita, Kansas for your convenience.