​​​​​​​​​​​​​​​​​ THE BOURNE FIRM

​​​​​​​​​​​​​​Experienced on-demand general counsel for small to mid-sized companies not yet ready for full-time general counsel. 

​​
Contact  : jon@thebournefirm.com  (  303.765.2436
© 2022-2024 THE BOURNE FIRM LLC. All rights reserved.

​​​​​Are you limiting your personal liability? Five critical actions following formation. 

So, you formed your corporation, limited liability company or other entity. Your personal liability is limited. Right? Yes, for now. Formation is an important first step. Here, however, are five critical actions after formation: 
  • You gotta keep 'em separated. Do not co-mingle personal assets with corporate assets. 

  • Maintain the formalities. This doesn't mean you can't wear jeans. And you don't have to create a police state. But you should (i) convene at least annual meetings of the board or managers (which do not have to be long), (ii) hold, at a minimum, annual meetings of shareholders or members (which, similarly, can be brief), (iii) document these meetings, including key actions and participants, (iv) keep stock or membership interest ledgers and (v) make filings and pay fees required for state registration.  

  • Capital is king.  Have you heard this before? How you raise capital is a consideration in formation. How you take it away counts in continuation. Courts hate it when you transfer company assets to yourself when a company is in financial distress. Keep the corporation or other business entity adequately capitalized.

  • Beware the signature. Many signature blocks on contracts and other documents are less than clear. But fixing them is as easy as one, two, three. One, above your signature, place your company's name (e.g., "MY GREAT COMPANY, INC."). Two, insert "By:" before your signature (e.g., "By: /s/ John C. Smith"). Three, insert your name and title below your signature (e.g., "John C. Smith, Chief Executive Officer").

  • Clear the conflicts. Conflicts of interest implicate the duty of loyalty. The duty of loyalty, if breached, can result in uncovered personal liability. More about this in a future brief. In the meantime, avoid conflicts of interest or have them approved by an independent third party. You gotta keep your liability limited.   






CORPORATE.
THE BOURNE BRIEFS.
THE BOURNE FIRM.