Operating a Corporation
When running a corporation, always keep records of important business activities. Below are some of the most common issues to consider in maintaining your corporation.
1. Keep corporate affairs separate from personal affairs
It's important to keep business affairs separate from the personal affairs of the shareholders, directors and officers. This means setting up a separate bank account and maintaining separate records, including books for accounting purposes.
2. Carry out all corporate meetings as required
Directors need to hold periodic meetings, and shareholders must meet once a year to elect directors. Meetings can take place in person or by phone. Either way, you need to make a written record of the items discussed and actions approved at the meetings. Alternatively, you can just get all the directors (or a majority of the shareholders) to sign a statement approving corporate actions. This is known as "written consent."
3. Manage the transfer of corporate ownership interests
Generally, as long as all applicable laws are followed, a shareholder is free to sell or transfer shares to anyone. However, with small corporations in which the shareholders act more like partners and each is integral to the success of the company, you may wish to consider placing restrictions on the transfer of shares.
Shareholders sometimes enter into a buy-sell agreement, which sets the terms for when shares can be transferred or sold. A typical buy-sell agreement would state that, if one shareholder seeks to sell shares to any third party, the other shareholders have a right of first refusal; that is, the other shareholders may purchase those shares at the same price. Only if the other shareholders do not purchase those shares can a shareholder sell to a third party.
Additionally, certain professional corporations can only have shareholders who are licensed professionals, which limits the transfer of shares.
4. Process all corporate tax forms and licenses in a timely manner
Every corporation must obtain a federal tax identification number, which is similar to an individual's Social Security number. Some states also require a separate state tax number. In addition, certain business licenses may be required. Please check with your city, county and state to see which types of licenses you need.