If your corporation doesn’t regularly address compliance issues, you could be facing legal claims by a wide range of people, including employees, vendors, shareholders, and customers. You could also be opening up personal liability for what should be corporate obligations, you could be risking the dissolution of your corporation, you could be tarnishing the image of your company, increasing your costs of doing business, and limiting access to new loans and / or capital.

There is good news though: Many of these issues can be addressed if you meet yearly. Take this example: If you make sure that your corporation not only meets but takes annual minutes, then you could avoid personal liability being accused against the shareholders in the lawsuit. It just takes a few hours of time but it can make a big difference.

It’s all about written consents

If your company or LLC has a board of directors, then the burden of complying with a wide range of laws can be minimized by using written consents. For example, California allows actions by shareholders and directors without a meeting of everyone, as long as they have written consent. If you had your corporation set up correctly, then there should be a provision in your bylaws for this – and there should also be a schedule of annual meetings.

It’s easier than you think to decide when action is necessary

Many business owners have trouble feeling certain when they need the shareholders or their board of directors to take action. In general, if business is considered “not in the ordinary course of business,” then it’s necessary to get approval. Other specific actions always require the approval of the board of directors, such as selling the company, merging, or amending the articles of incorporation.

Examples of “not in the ordinary course of business”

It may initially seem convenient to have a specific definition of “not in the ordinary course of business,” but this isn’t a black and white term. There are gray areas. If you’re not sure, then your best bet is to call Law Offices of Torrence L. Howell for your free case evaluation. In the meantime, here are some things that would be considered not in the ordinary course of business and would require action from the board:

• Purchasing expensive items
• Issuing additional shares
• Granting options for employees to buy shares
• Signing contracts that commit the corporation to significant tasks for large amounts of money and / or long periods of time
• Singing employment contracts with new corporate officers
• Borrowing money
• Transactions between shareholders and executive officers

As you can see, an annual meeting can help with these issues. You can get regular approval for the things you need approval for, without putting yourself at personal risk. For more information, contact Law Offices of Torrence L. Howell at (909) 920-0908 or fill out this form to schedule your free case evaluation.