The Importance of Well-Drafted Corporate Documents

The purpose of incorporating is liability protection, but without taking care to complete each step of the process, the corporation can be disregarded ("piercing the corporate veil") and the shareholders can be held personally liable. In other words, merely filing Articles of Incorporation and placing them in an expensive binder with fill-in-the-blank Bylaws is not sufficient to accomplish the purpose of incorporating.

California courts evaluate the facts and circumstances of a particular situation, but to "pierce the veil" there are two legal requirements: (1) there must be such unity of interest and ownership that the separate personalities of the corporation and the individual no longer exist, and (2) that, if the acts are treated as those of the corporation alone, an inequitable result will follow.

While "piercing the corporate veil" is viewed by the courts as a drastic remedy, it most often occurs where there are only a few shareholders who fail to complete each step involved in the formation of the corporation.

One California case reviewed many of the circumstances that have been involved in "piercing the veil". The following are a few of the factors that can be minimized with a well-formed corporation:

  • The key shareholder treats the assets of the corporation as his own
  • The failure to issue stock (or authorize the issuance of shares)
  • The failure to maintain minutes or adequate corporate records
  • The failure to adequately capitalize a corporation
  • The total absence of corporate assets
  • Disregarding legal formalities

Our firm takes care to complete each step of the incorporation process.

We Handle Every Step of the Process

Unlike an incorporation service, we are a law firm. We not only prepare and file Articles, we provide counsel related to all aspects of organizing a business, including:

  • First Minutes and Bylaws, including the election of Directors and Officers
  • Capitalization of the company
  • Issuance of share certificates and qualifying shares with the Department of Corporations
  • Obtaining tax identification numbers
  • Filing a Subchapter "S" election if appropriate.

A Whole New Way To Think About Incorporating
We offer full service and flat fees, providing our clients with the highest quality legal work and certainty in terms of cost.

The Beginning of the Relationship – Not The End

We also view the formation of the corporation as the beginning of the relationship with our clients – not the end. We advise entrepreneurs on their day-to-day legal concerns; and we assist with raising capital and drafting key agreements.