Ongoing Compliance – Protect Your Business Structure and Avoid Piercing the Corporate Veil
Many new business owners are unaware of the requirements they must fulfill in order to keep their corporation or limited liability company (LLC) compliant with the state of formation. Incorporating a business or forming an LLC offers business owners the protection of limited liability, meaning the owners are typically not held responsible for the debts of the company. However, just having a corporation or LLC does not mean that the owners’ personal assets are continually protected. Business owners must comply with specific requirements in order to remain protected under that corporate or LLC status. Otherwise, their limited liability may be lost, which is known as “piercing the corporate veil.” Small business owners should understand the direness of this situation and work to maintain the limited liability the corporation or LLC affords them.
All states impose certain requirements on corporations and LLCs formed there. One such requirement is the filing of an annual statement (a biennial statement in some states). These statements are the state’s way of keeping updated information on corporations and LLCs. Most states also impose a filing fee on these statements. Not filing annual statements and paying the necessary fees in a timely manner can result in the corporation or LLC being in “bad standing” with the state. Being in bad standing in a state can eventually lead to administrative dissolution of the corporation or LLC. Therefore keeping your corporation or LLC in good standing at the state level is
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