Piercing the Corporate Veil

The importance of following corporate procedures.

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Once you decide to incorporate your business in Illinois, you should follow the statutory guidelines for maintaining the corporate structure. This means there needs to be shareholder and director meetings at least annually. Officers must be elected to conduct the business on a day to day basis. Minutes of the shareholder and director meetings should reflect not only the annual elections of officers but also activities taking place throughout the year such as capital expenditures, a yearly budget, and employee issues to name just a few. Failure to follow the corporate structure brings about the possibility of "piercing the corporate veil". This term means that the protection of the corporation is lost and liability, that normally would be contained within the corporation, is transferred to the individual shareholders, officers, and directors. This means that individual assets may well become at risk. Rather than lose the corporation protection, it is far wiser to get in the habit of holding meetings and preparing minutes of the meeting even if the business is only one or two shareholders.