New Law Helps Combat Corporate Minutes Scams

A 2012 law is helping small businesses (corporations and LLCs) avoid getting scammed by the corporate minutes solicitations that were the subject of one of this blog's earliest, and by far its most popular and commented on, post. The law requires more notices on such mailings, the idea presumably to help these stand out from official mailings from the Secretary of State regarding Statement of Information filings. The jury is still out on effectiveness.

Secretary of State: Stronger Laws to Prevent Fraudulent Solicitations

Blog Post Cited in Orange County Register Article on Annual Minutes Mailings

This blog's most popular entry, posted in January 2007 but updated continually since, concerning misleading corporate and LLC annual minutes mailings was recently cited in a small business advice column in the Orange County Register:

Old scam reappears in O.C.:

Burbank attorney Jonas Grant gives a good explanation of the law on his California Business Law Blog, based on problems his clients reported to him in 2007. The post has gotten dozens of comments from people who received these solicitations, some from other states.

(One even accuses Grant of sending the letters, thus the red-letter disclaimer at the top of his post. Talk about shooting the messenger.)

By Jan Norman, March 29, 2009

Proper (Business Attorney Assisted) Set Up and Maintenance Crucial to Limited Liability Protection of Corporations and LLCs

Couldn't agree more with this excerpt from today's article by fellow Southern California WealthCounsel attorney Alexis Martin Neely:

You'll recall from last week, that I said the purpose of your business entity is to limit your liability as a business owner. This is to encourage business owners to take risks that they would not take if they had unlimited personal liability.

Here's the thing though, the shield is only intact if certain formalities are maintained, such as proper filings with the State, annual meetings of the shareholders (for corporations), and separation of all financial activities between you and the entity.

Far too often, I've come across business owners who used an incorporation service, a shoddy lawyer, or a CPA to incorporate their business and when I asked these business owners where their operating agreements, bylaws, annual meeting minutes and state filings were kept, they couldn't tell me.

Why is that? Because they didn't realize that merely filing articles of incorporation with the State does not provide liability protection.
Your corporate entity must be established correctly from the beginning with governing documents and then maintained on a yearly basis.

If you don't do that, you may come to find out too late that your business entity doesn't provide the protection you thought it did.

So, make sure that once you decide what kind of an entity to use, you set it up right and then maintain that entity.

While I'm open to a pleasant surprise one day, thusfar I have yet to review one corporation or limited liability company that was properly set up and maintained by a do-it-yourselfer (including those who used online incorporation services, paralegals, CPAs, non-business attorneys).