Why Every Corporation Need A Corporate Kit

John Fisher, J.D.

You have made the decision to incorporate your business. There are very good reasons for most businesses to incorporate, not the least of which is protecting your personal assets from potential liabilities which may arise from your business. If you do not place a corporation between your business and your personal assets, any creditor or potential claimant against your business will be able to attach your personal assets. These claims can devastate you personally.

In my practice I am often confronted with businesses who have potential lawsuits against them. Many of these businesses have gone through the process of registering a corporation. When they come to the office, they feel that this act alone will provide protection against potential lawsuits. Many of these parties have purchased fancy corporate minute books which give them a feeling of well being and safety in their corporate existence.

In the great majority of cases, when assessing the client's risk of personal exposure arising from a potential lawsuit, a review of the minute book discloses that the documents in the minute book are blank. Many, if not most of the firms that sell these minute books do not include the documents which are necessary to complete the incorporation process, let alone maintain the corporation following formation. Many of these companies will include blank "sample" documents which are never completed by the client.

In these cases, the client is often surprised when I inform them that they may be at risk of personal exposure for the potential liabilities of their corporation because they have no documentation of corporate formalities. Under corporate law of every state, creditors and claimants can argue that the "corporate veil" should be pierced and personal assets should be attached where these corporate formalities are not followed. It is not good enough to have a fancy corporate minute book. If the documentation within the corporate minute book is not complete, there is a good potential that the very reason that a corporation form of business is used (protection of personal assets) will be frustrated.

In this regard, it is much more important that the documentation be in place and fully executed than that the company have an expensive, fancy, corporate minute book that does not include appropriate documentation. In fact, I would rather see the appropriate documentation in a file folder than a fancy corporate minute book that does not contain appropriate documentation that corporate organizational and ongoing formalities were followed. Unfortunately, most vendors of corporate kits do not tell you this. They generally ship a fancy corporate kit and leave you hanging to figure out what documentation needs to be put in place.

This documentation should include Organizational Minutes, Assignments of Incorporate Rights, Elections of Officers and Directors, appropriate Waivers of Notice of Meeting, Adoptions of Bylaws, Banking Resolutions, Corporate Bylaws, and a host of other organizational documents. You should be certain that all of these documents are signed and included in a central place. For a small business with financial constraints during the startup period, this documentation should be a priority above purchasing an expensive corporate kit. You can take a three ring notebook, label it "Corporate Minute Book," and place all of your completed documentation in that minute book.

You should also be aware that there is no legal requirement that you purchase a fancy, expensive corporate minute book from a commercial vendor. It is more important to have your documentation in place and fully executed. These documents should be organized in a central place. If you have the appropriate executed documentation, you will be well ahead of most companies who purchased expensive corporate minute books but do not have their documentation in place.

In this regard, the free2incorporate Corporate Minute Book E-Book series is a very good solution for small businesses. The free2incorporate system provides you with all of the organizational documents that you need to assure corporate compliance. Their document package automatically generates your documents and make it very easy to assemble your minute book. You can generate everything that you need to form your corporation at a very affordable price. Be certain that you have the appropriate parties sign all documents.

This Article Provided Under License From The Author. This Article Is (C) 1999, John Fisher, all rights reserved.