and operating a small business can be a very rewarding experience,
emotionally as well as financially. Or it can be an absolute
nightmare if you don't structure and operate your business properly.
the resources of a good lawyer and accountant. They can help
you avoid problems and even get you out of trouble you may stumble
considers your corporation a separate entity. It has a birthdate
(the date of incorporation), and can have a death date (the
date you close the corporation). It can enter into contracts
and agreements and has the same responsibilities as you would.
As a separate
entity, your corporation can protect you from lawsuits and asset
seizures arising from the operation of the corporation (as long
as you are not personally negligent or irresponsible). Many
people see this protection as the main reason for forming a
corporation vs. operating as a sole proprietor without any protection.
But in order
to be considered a separate entity, you have to run your corporation
according to some rules, laws and guidelines. The following information
touches on two major aspects of operating your corporation as a separate
entity: corporate accounting and corporate minutes.
|Two major aspects of operating your corporation as a separate entity are : corporate accounting and corporate minutes.
corporation should have its own bank account and Employer Identification
Number (EIN) issued by the IRS. This helps to establish the
corporation as an entity, separate from its stockholders and
records should be kept to record income, expenses, assets (equipment,
real estate, intellectual property, etc.) and liabilities (debts,
loans, mortgages, etc.). It is recommended that you hire an
accountant to help with the accounting functions, year-end taxes
and payroll taxes.
system can be as simple as a set of spread sheets (on paper
or a computer). Or you can purchase accounting software such
as QuickBooks, Peachtree, MYOB, etc. You may want to have your
accountant help you set up the computer software so that you
have all the accounts you will need. Also your accountant can
help you learn how to enter different transactions. (Don't ask
them during March, April or October - IRS tax deadlines!)
with your accountant and develop a plan for recording your business
activities and turning the information over to your accountant
to be put into a computerized system either monthly or quarterly.
This costs more for the accountant's services but can save you
a lot of time and headaches (and money) if you get in trouble
with the IRS or your state/city taxing agencies.
businesses are required to keep minutes of the activities of
the business. Minutes are the voice and history of the corporate
entity and can be used in court cases. Minutes also show that
the officers/stockholders of the corporation are operating the
corporation as an entity and not just an extension of themselves.
and shareholders can lose the protection of the corporate entity
if they do not operate the corporation as a corporation; this
includes keeping accurate minutes.
can be as simple as a dated note written on a piece of paper
and inserted into a three ring binder. Corporate minutes don't
have to be on fancy paper or letterhead and don't have to use
any special language style (legalese, corporatese, etc.). Corporate
minutes should be clear and understandable.
It is recommended
that the corporate minutes be typed, include a date, names of
participants and signatures of participants or corporate officers.
include in the minutes:
few things more satisfying than building a business from scratch.
There are few things more trying than fighting personal lawsuits
and the IRS. Operating your corporation properly will allow
you to focus on running your business rather than defending
it or yourself. It takes an extra investment of time and money,
but just consider it additional insurance, both financial and
for your peace of mind.
David Berky is president of Simple Joe, Inc. a marketing company that sells simple software under the brand name of Simple Joe. © Simple Joe, Inc.