Corporate Compliance Scams Small Businesses

I received a form in the mail the other day regarding my small business corporation. It informed me that if I did not comply with their service, it could "result in personal liability of the Corporation's Shareholders, Directors and Officers for all Corporation debts and obligations without limit to amount." Wow, sounds scary and official, maybe I should send in the "requested" $100 to receive a "Certificate of Minutes of Board of Directors and Shareholders".

In Florida and in most states, there is a requirement that every corporation formed in that state file an annual report with the local secretary of state or other governing body. The consequences of failing to file this annual report with the fee will result in the involuntary dissolution of the corporation and then possible exposure to personal liability.

However, my flyer in the mail did not refer me to the annual report requirement, but rather the "requirement" that each corporation should keep proper records of their articles of incorp., bylaws and minutes. I would guess that most small business corporations do not keep formal records on their corp. So this means they are all exposed to personal liability? I don't think so. The corporation cannot be involuntarily dissolved simply because the record keeping is slack.

The only other way personal liability can flow through to an individual is through the common law concept of "piercing the corporate veil". Generally, courts have found in some rare instances that a corporation cannot sheild an individual from personal liability. These instances include fraud perpetrated by the individual or a deception in dealing with the person and the corporation. The overall liability protection of a corporation is broad.

The service offered to me by the flyer was for a pre-printed form, possibly with some of my corporation's information printed on it. The form's title is "Certificate of Minutes of Board of Directors and Shareholders" which would record, basically, any changes in the corporate structure (shareholders, directors or officers) for the year. The form would then be placed in my corporate records file.

Record keeping is a good idea to keep your corporation in order and provide a history of its changes. Usually, a corporation should have copies of

1. Its articles of incorporation.
2. Its bylaws, if any. They are not necessary.
3. Its minutes,
4. A list of names and addresses of directors and officers,
5. and a copy of the most recent annual report filed with the state.

However, shoddy record keeping is usually not fatal and can be remedied very easily for most small businesses. Its definitely not worth the $100, Compliance Filing, INc. is trying to scare out of you.