Why is it important to maintain corporate formality?

So you’ve incorporated your business and now want to take all the proper steps to make sure your personal assets are protected. What do you need to do?

Consequences of Not Maintaining Corporate Formality

Laws in the state of California, where most of our clients are incorporated, require corporation and Limited Liability Company (LLC) owners to observe certain corporate formalities in order to reap the benefits of the liability protection an incorporated entity provides. (For differences between Corporations and LLCs, take a look at this blog article.) The consequences of failing to meet the state’s standard can be costly to owners and shareholders alike.

Consequences of Not Maintaining Corp Formalities

State Requirements

California requires “corporate formalities,” or documentation and procedures in order to keep the corporation’s liability protection in place.

The following are required to maintain this “corporate veil” of security:

  • Maintaining good standing in the state of incorporation
  • Continuing to keep the stock ledgers accurate
  • Recording the corporate minutes, with specific resolutions, each year

Don’t know what a Corporate Veil is? Check out our post on what it means to have a Corporate Veil and what can pierce the Corporate Veil.


How Can the Corporate Records Program Help You Maintain Corporate Formality?

Attorneys Gale and Vallance can take your existing (or nonexistent!) corporate records and review them for compliance. Once the status of your entity and records are examined, our office will provide you with a plan of action for how we can bring all your records up-to-date, and then we will aid you in keeping them up-to-date through our annual maintenance program.

If you are interested in our service, we will review and audit your corporate records at no cost or obligation to you. Schedule an appointment and we will review the records you do have and recommend a specific course of action to bring your records up-to-date and maintain them in the future. Either way, your review, and consultation are free.

See our full corporate records review process here.


For more assistance or to ask an orange county business attorney with specific questions about your business, please contact us at info@galeandvallance.com, or (714) 634-1414.