Corporations - Maintaining the Corporate Veil

Corporations - Maintaining the Corporate Veil

Client Letter - What this idea is about	Engagement Letter	Learning Objectives	What it does; Why It Works - Plain English Analysis	What It does; Why It Works - Technical Analysis & Citations	Tax Killers: ABT, Activity Based Taxplanning
Cost Killers: ABC, Activity Based Cost & Profit Planning	What to Gather/Organizer	Assistance, What To Do, Forms - checklists, time-line to do, etc.	Spreadsheets & Computations	Contracts, Trusts, etc.	Reports Required
Checklists for Deployment	Checklist for Monitoring	Financial Accounting: Bookkeeping & Financials	Compliance - what is required for protection, defense, etc.	Alerts & Dangers - Risks, Asset Protection, IRS Defense, etc.

Client Letter -

What this idea is about

Description/Scope

Purpose

Who This Applies to

When to Perform

Special Circumstances

Why This Is Important

General Benefits 7 Objectives

Studies show that most small, closely held corporations would not withstand the challenge of a lawsuit or IRS audit. "Why not?," you may ask, "I thought a corporation would protect me from liability." A corporation will protect you from liability, but only if you follow the "corporate formalities."

Engagement Letter

Learning Objectives

What is does, Why it works - Plain English Analysis

Use the following as a checklist:

Did you hold organizational meeting and appoint a board of directors?
Did your board of directors appoint officers? Do you have written minutes of these meetings?
Do you have a Federal Tax ID number?
Did you physically issue the shares of stock?
Does your corporation have its own bank account? Do you "commingle" your personal funds with your corporate funds (i.e., do you use the corporate checkbook to purchase personal items and vice-versa)?
Does your corporation have a business license? A telephone in its own name? A physical office address with a written lease?
Do you have annual meetings of the shareholders and board of directors? Do you have written minutes of these meetings?
Do you sign all of your leases, contracts and letters in the capacity which you are acting? (e.g., "President" or "Secretary").

Your failure to follow one or more of these formalities may result in a "piercing of the corporate veil." This is a legal expression for the process by which a court can actually penetrate the invisible wall of protection between you and your corporation and permit a creditor to go after you personally. Let me ask you a question . . . do you think IBM violates any of the above mentioned items?

The lesson here is that if you want to be treated like a legitimate corporation, then act like one! Go dust off that big, black corporate minute book that you tossed in the closet years ago. Look through the forms. It's not "rocket science" . . . it's simply a matter of keeping records in case of a lawsuit or IRS audit. You don't need to run your corporation with rigidity, you simply need a "paper trail" to justify what you are doing.

Here are a few tips:

If you use your spare bedroom as an office, have written lease between you and your corporation. Make it a "net" lease, so that your corporation can pay you for its share of the utilities, taxes and insurance on your home.
If you a constantly "funnel" money between your personal and corporation bank accounts, draw up a line of credit agreement between you and your corporation. That way, the "piecemeal" payments that go back and forth will appear perfectly normal (after all, isn't that what you do with a credit card account?).
If you need a legitimate office and phone, consider an "executive suite." There are companies that will rent you an office address with answering service for as little as $75/month. This will not only give your corporation legal legitimacy, but it will give you a place to meet an occasional client.

Do not wait until you are sued or audited to "backdate" the paperwork! If you get caught (and you will), you'll find yourself in a legal mess that attorneys just drooooool over! An ounce of prevention is worth a pound of regret!

What It does, Why it works - Technical Analysis & Citations

Law (commentary and citation)

Regs (commentary and citation)

Cases (commentary and citation)

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Tax Killers

This is about Activity Based Taxplanning - maximizing deductions, minimizing cash outlay and maximizing the amount of cash retained and the net worth.

Tax is a subject that many view in order to cut costs. Taxes are a cost just as any other cost. It happens this cost is somewhat intangible and is defined by legislation without a tangible item to view and control. The money is spent and the control of the expenditure is more appropriately administered by someone trained in the law.

Cost Killers

This is about Activity Based Costing - methods to cut costs, management accounting, management information systems, decision support sytems - in general about being a manager.

What to gather - preparing for your CPA, your attorney, or preparing to start the job on your own

From Banking Records

From Customer Records

From Signed Documents

From Your Other Business, or Financial Records

From Corporation or Organization Records (meetings, etc.)

Assistance - What To Do - Forms - checklists, time-line to do, etc.

Assistance - What to do

Forms - Checklists - Etc.

Spreadsheets & Computations

Contracts, Trusts, etc.

Reports Required

Checklists for Deployment

Checklist for Monitoring

Financial Accounting: Bookkeeping & Financials

Financial Statement Presentation
Notes to Financial Statements
How to Make Entries
What Kind of Records to Keep
Bookkeeping Methods - Cash, Accrual and Other
How the Business Entity Affects the Recording

Sole Proprietor

Corporation - C & S

Partnerships - General, Limited, Limited Liability Company, Registered Limited Liability Partnership or Company

Trusts

Tax Exempt

Compliance - what is required for protection, defense, etc.

Alerts & Dangers - Risks, Asset Protection, IRS Defense

Alerts & Dangers - Risks
Asset Protection
Your Defense