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What’s an Annual Business “Check Up”?

Confused? So are many Business Owners (i.e., even Major corporations), and do not understand nor appreciate how important this is to your business, your livelihood, your employees and your family. You regularly service your cars, protect and maintain your home & family, keep your credit rating up and pay the bills. Take a vacation – relax – but your business is your livelihood.

If you “assume” you have limited liability under California laws – regardless of your structure and entity (i.e., C-Corp. S-Corp, Limited Partnership, LLC or whatever), if you do not maintain appropriate and required business records, the plaintiffs’ attorneys will search for this first – in an attempt to “pierce” the corporate veil – essentially making you personally liable.

I share with my clients a simple checklist annually – the “bullets” are so simple to follow:

Ownership Interests – Has there been a sale of Stock if a Corporation, a transfer of shares, a Transfer or grant of Membership Interests if an LLC, Partnership, or Ltd. Partnership?

Grants or Warrants – Has anyone or any entity been granted a contingent or other right to acquire an ownership interest in the Entity?

“Material Events”  Have any events taken place in your business that require Board or other approval?

Documentation?  Disclosure?  Contract review? 

Employment (or Board Member) Agreements  Any obligation to pay agreed monies/salaries?  Defer?  Bonus or other Contingency agreements? Grants?  Non-At-Will status? Term agreements? Issued an Employee’s Manual? Begun (or contemplated) a Benefits Plan (Pension? Profit Sharing? 401K? Other Plan arrangement)? Termination of any Plans?

Officers & Directors – Any changes made? Contemplated? Resignations or terminations? Any loans made, guaranteed, offered or otherwise committing the Entity?

Litigation – Any litigation of “material significance” to the Entity which requires disclosure? Other handling?  Reserves established? Budgets, Strategy, Contingencies established.

Insurance – Any “claims made or incurred”? Disclosed as required? Continuing coverage assured? Long term coverage issues ascertained and concluded? Life Insurance obtained for Officers or Directors?

Dividends/Taxes/Allocations – Any disbursements or other allocations to Shareholders? Partners? Members?

Corporate Compliance – Filed all appropriate annual State (or Federal) forms? Held Annual Meeting of Shareholders? Board Elections and Meeting? Appointment of Officers? Prepared all appropriate Minutes of Meetings? Resolutions required?

Intellectual Property  Appropriately registered all Trademarks, Service Marks? Considered (or filed) Patent Applications (as appropriate)? Registered Domain Names? Secured IP rights in Websites and other Marketing or other Literature?

These are simply some of the “Significant Events” that you should review on at least an Annual Basis. Depending upon their significance to your business, both financially and structurally, you may be required to adequately disclose them to appropriate governmental authorities, your shareholders, members or others. In any event, I “strongly” suggest that if not earlier reviewed by your attorneys, that you give them the opportunity to do so at your very earliest opportunity – an “ounce of prevention is worth a pound of cure”. Preventive Law is the most simple and cost-effective manner to maintain your business.