incorporationTwo weeks back, I have incorporated a Delaware Corporation. I’m planning to start my business operations after 6 months.
The reason I have incorporated my company earlier is because I need to file some patents and trademarks under my company name.
Is there any post incorporation formalities I need to complete to stay out of trouble?
I’m talking about stuffs like Board Minutes, Stock certificates etc.
P.S: I’m a single founder and planning to bring investors on board after 6 months once I complete my Minimum Viable Product.
Thanks
You will find it very difficult to bring in investors if they have any questions about whether you’ve cut corners in your business formation, so you need to do it the right way the first time. Keep in mind that when it comes to being sued, attorneys go after whoever has the deepest pockets, and in this case it will be your investors, so those investors are going to do due diligence to make sure every detail of your business is up to snuff legally before they’ll give you one thin dime. This is experience talking. I used to bring deals to investors, and it’s always the first thing they look at and ask about. No matter how good your product or service is, it isn’t worth a plugged nickel to them if there’s any potential for exposure to litigation caused by faulty or negligent business practices, beginning with the formalities required of each type of business entity.
There are requirements for corporations, such as board meetings, shareholder elections, and so on. There are record-keeping requirements and a slew of other things you need to do in order to maintain your corporate protections. If, for example, you don’t hold and document shareholder meetings (for example), that could be grounds to strip you of personal immunity for lawsuits because you failed to observe the formalities for your business entity. This is called “piercing the corporate veil”, and it is one of the first things attorneys look to do when filing suit against a corporation. If they can accomplish that then the company’s principals become personally liable for anything they’d normally be immune from.
You really need to make sure that you learn about and follow every detail of the rules governing business entities, or else it could bring you tremendous grief in the long run.
The advice others have posted is sound and shouldn’t be disregarded. If you think you can’t afford an attorney now to help you achieve this, what happens when you have no option but to pay one to defend you in the event of a lawsuit?
I hope this helps.
Good luck!
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