At Universal Bookkeeper we strive to assist and helping our valued clients in all facets of their business and finances to the best of our abilities. We advise our clients and our goal is to educate them on how they can keep their personal assets safe. This usually involves separating their liability through a separate LLC or Corporation and incorporating the correct level of insurance necessary for their small business.
Additionally, we advise our clients on how to conduct their business to ensure that they operate in a way that will not “Pierce the Corporate Veil”. Piercing the corporate veil is a term used to describe ways to get around the protection that an LLC or Corporation typically provides to the owners and shareholders.
Here are some tips and financial best practices to keep your entity up to date and to operate it in a way that will best protect your personal assets and financial resources from this risk:
- Do not co-mingle funds: This means to ensure that you have
separate Business and Personal bank accounts. Do not write checks
from your personal bank account to pay for business expenses. The
best practice would be to make an equity contribution to your business and
then to pay for those expenses out of the business account.
- Operating your business out of a bank account that has been used to make both business and personal expense deposits can appear to be a conflict of interest. Auditor or court officials may be led to believe that if you are running business expenses through your personal bank account, all cash in that bank account are business assets. Trust us0 you don’t want this to happen!
- Make sure you are adequately capitalized to ensure you aren’t using personal funds. If you need to move or invest money into your business, do so as an equity contribution to the business and deposit funds into your business bank account. This means simply write a check to your business and record the equity contribution on your balance sheet.
- Make sure you use Corporation name on all legal documents. Using your personal name in some cases and your business name in other cases can again confuse an auditors or court officials to make incorrect assumptions that you personally are operating the business which opens up your assets to available liabilities.
Follow the suggested procedures in regard to corporate infrastructure:
- Maintain your corporate minutes:
- Annual Shareholder
meeting needs to include:
- Minutes of the previous meeting: The minutes of the previous year’s AGM must be presented and approved.
- Financial statements: The company presents its annual financial statements to its shareholders for approval, in addition to the tax return from prior year.
- Ratification of director’s actions: The shareholders approve and ratify (or not) the decisions made by the Board of Directors over the previous year. This often includes the payment of a dividend or planned dividend to be paid.
- Election of the Board of Directors: The shareholders elect the Board of Directors for the upcoming year.
- Annual Shareholder
meeting needs to include:
Following these tips should ensure that you are conducting your business in the most professional way, which will help to ensure that your back-office business operations are sound and that your personal assets are protected from potential risks.
Have a question about all of this, or need further clarity? Ask us! We proudly offer Consulting services to small business as part of our suite of services. Drop a line to Justin Miller at justin@universalbookkeeper.com
