Business Law: Risk Management

"Doing business" involves such diverse activities as advertising, marketing, public relations, sales, administration, management, as well as the performance of services or manufacture of goods.
One area of business administration that is frequently ignored is risk management.
Some risk management programs are obvious, such as the acquisition of casualty and liability insurance and the imposition of safety standards in the workplace. 

The preparation and maintenance of business records is critical in business risk-management. We take notes, preserve receipts, letters and phone memos, and keep copies of outgoing correspondence and interoffice memos, not only to forward business but also to protect ourselves from claims of customers, governmental entities and others, and to limit our liabilities.

If your business is a corporation, you must perpetuate the integrity of the corporate form, not only to protect the corporate tax status but also to insulate the shareholders from liability for corporate obligations. A creditor who wants to reach the assets of the corporate investors may try to "pierce the corporate veil" and show that the corporation was just a "shell and a sham." The better the paper trail you maintain, the more you demonstrate your respect for the corporate identity, the more likely you will repel any such attack on the corporation.

The paper trail begins at the time of incorporation: Once the Articles of Incorporation are filed, the corporate Minute Book should reflect the holding of the first meetings of incorporator and directors and shareholders. Stock must be issued. The Notice of Transaction must be filed with the Commissioner of Corporations and the annual Statement by Domestic Stock Corporation with the Secretary of State.

Annual minutes, or certificates of action in lieu of meetings, of directors and  shareholders should be prepared and placed in the Minute Book. In addition, minutes should reflect ratification of any special actions of officers or directors. 

Be sure your minutes are up to date. If you need assistance, call Jerry Kessler at (661)255-1001. 

Copyright © 1991 by J. Kessler