Corporate governance & compliance preserves the corporate veil and is a duty of any officer of an LLC or Corporation. What is corporate governance and compliance, and why is it important to protect the integrity of the “corporate veil” throughout California and the U.S.?
Important Takeaways of How and Why Corporate Governance & Compliance Preserves the Corporate Veil:
- The “corporate veil” is the primary reason for having any business entity. The business entity shields the company’s owners from personal liability that might otherwise arise out of the risks and disputes of business.
- Protecting the corporate veil through governance and compliance is a key duty of any officer of the corporation, and should always be a focus. Depending on the size and scope of the corporation or LLC, governance and compliance should be an annual priority, and at least a quarterly focus.
- Governance is about setting the policies and direction of the corporation. Compliance is precisely what it sounds like: ensuring the company and its employees fully comply with all federal, state, and local laws and ordinances, as well as financial and tax-related reporting requirements.
What is the Corporate Veil?
The corporate veil is simply the legal protection within any corporate entity that separates the owners, shareholders, officers, and directors of a corporation or members in an LLC from personal liability for business liabilities and obligations. A corporation is designed to be a separate entity from its owners. It may be helpful to imagine the corporate veil as a brick wall that separates and protects the company’s owners from creditors and the corporation’s liabilities.
However, specific actions related to corporate governance and compliance must be taken throughout the year, or at least annually, to ensure that the foundation of corporate documents, policies, procedures, and the actions of its employees and shareholders remain in full compliance with all federal, state, and local laws and regulatory mandates.
Attention must be applied to every aspect of the company to ensure its owners’ personal funds and assets are not commingled with the corporation, and vice versa. Commingling of funds or assets directly threatens the integrity of the corporate veil.
The Rate of Change Has Perhaps Never Been Faster Than Today’s Business Climate
Recent years have brought dramatic change in both the legal corporate landscape and the activism of shareholders. Information is instantly electronically shared between international, federal, state, and local governments and agencies. It is much easier for any tax or regulating authority to piece together any corporate entity’s specific activities and information.
Corporate officers and the Board of Directors (if the business has a Board of Directors) must consistently ensure corporate governance and compliance preserves the corporate veil while staying abreast of updates and changes to a host of local, state, and federal ordinances and laws. In coordination with Janathan L. Allen, APC, Allen Barron provides our clients integrated legal, tax, accounting, and business services. We ensure corporate documents and bylaws are current and compliant with all changes and updates to associated laws and regulatory requirements.
We help guide the development and implementation of strategies, policies, controls, and checks and balances internally and externally to ensure reporting and compliance responsibilities are met. Our experienced professionals work to ensure that all levels of the organization understand their responsibilities and how to represent the corporation within the scope of their capacities.
Maintaining corporate governance & compliance preserves the corporate veil while maintaining effective standards for all officers, directors, and members of the corporate family. This important corporate responsibility ensures that reporting and tax requirements are fulfilled, legal exposures are kept to a minimum, and the corporate veil is protected. If you have questions about corporate governance or compliance, we invite you to learn more about the integrated tax, legal, accounting, and business consulting services of Allen Barron and contact us or call today to schedule a free consultation at 866-631-3470.
