From Forbes.com: Would your small business stand up in court? Would you be able to prove that your corporation is not a sham?
I confronted these questions following a discussion with Richard Frunzi, the CEO of WebMinutes, who convinced me I ought to get caught up on compiling annual meeting minutes for the little S Corporation I run, with me as president and my wife as vice president. Like many small businesses that incorporate for tax reasons but have only a handful of investors, we don’t exactly need to rent a convention center for our annual meeting. It’s more like: “Financial report accepted unanimously, although we wish it was more. Now please pass the ketchup.”
But though it may be hard for a small business to take the formalities seriously, you will regret not having done so if you have to explain yourself to a court or the IRS, says Frunzi, a lawyer and accountant. They are the ones you ultimately want to take the corporation seriously. If they can prove you’re not behaving like a real corporation, that’s called “piercing the corporate veil” and means all the liability and tax advantages of operating as a corporation go away.
Full article here.