New Incorporation Requirements What You Should Know
A new incorporation transparency law is in the works. This time it’s federal.
Planning to form a new incorporation or limited liability company (LLC)? Are you an owner of an existing small business entity, professional practice or corporate investment vehicle registered with the state? Then your name, address and ownership status will be required to be collected and maintained by state filing agencies under a proposed federal law. The information would be required to be updated annually, and be provided to civil or criminal law enforcement upon presentation to the state of a subpoena or summons.
If you are a non-U.S. beneficial owner, under the proposed law you will be required to provide a certification from an in-state company formation agent that the agent has verified your identity. Civil and criminal penalties will apply to persons who knowingly provide false beneficial ownership information to a state filing agency.
Apparently, the Department of Homeland Security (DHS) would use existing grant funds and appropriated funds to meet the requirements of the proposed Act.
THE INCORPORATION TRANSPARENCY AND LAW ENFORCEMENT ACT
Sen. Barack Obama, D–Ill., Sen Car Levin, D–Mich., and Sen Norm Coleman, R–Minn. recently introduced a federal bill requiring states to keep detailed records of the true beneficial ownership of all corporations, limited liability companies, and perhaps other "artificial entities" that are registered with state filing agencies. The Incorporation Transparency and Law Enforcement Act would require Secretaries of State to provide the corporate ownership records to law enforcement agencies to assist them with their investigations into criminal conduct.
"Criminals are hiding behind U.S. corporations while committing all sorts of crimes -- from terrorism to money laundering, fraud and tax evasion," Levin said. "The bill we are introducing today will strike a blow against corporate secrecy, strengthen law enforcement, and curb the misuse of U.S. corporations."
It is more and more important that you develop good corporate practices and habits. New incorporations should from the start observe the corporate formalities that are essential to good governance and corporate compliance.
As soon as practicable after filing your articles of incorporation or other formation document, hold your organizational meeting(s). At the meeting(s) you would normally:
Elect the directors;
Adopt the bylaws or operating agreement;
Adopt a form of share certificate or other ownership evidence;
Accept offers to purchase or acquire the stock or ownership interest in the company;
Authorize the issuance of beneficial ownership interest (i.e. shares of stock, membership interest, partnership interest, etc.);
Authorize bank accounts and account signatories;
Elect the officers, managers, etc. as appropriate; and
Adopt appropriate resolutions as necessary.
You may have other organizational requirements as mandated by your state law, or need to make elections pertaining to tax matters, or make other official management and investment decisions.
Then, each year hold your annual meeting of the shareholders, and the annual meeting of the directors to attend to you annual corporate meeting requirements. Your bylaws or operating agreement should specify the requirements for these meetings. You may need to hold other regular or special meetings periodically throughout the year.
Sometimes you can attend to such formalities by unanimous consent of the persons required to meet. In that case, your meeting may be "on paper", by telephone, video conferencing, video chatting, or other electronic means.
Your existing or new incorporation or LLC will take some effort and expense to operate and properly maintain. You get to enjoy the tax benefits and limited liability features, though. With a little thought and some good help, you could perhaps automate the process of holding meetings, adopting resolutions and recording minutes. Under new and proposed legislation, you had better be organized.
Need help writing the minutes for your annual company meetings? We can help you automate and streamline the process. It's simple when you know the secrets. Start here.
