Many small businesses choose to form corporations through which to operate because of the limited liability afforded to corporate shareholders. This is a wise choice, but merely incorporating is not enough. In order to actually enjoy the ongoing protections of limited liability, California law requires corporations to keep certain records. This is true regardless of how the incorporation is accomplished (with the help of an attorney or through a self-help book or service). Failing to keep proper records puts the corporation's shareholders at risk of personal liability for corporate debts and liabilities. Since personal liability is exactly what the shareholders wish to avoid by incorporating, every corporation should calendar and complete the following basic minimum paperwork (in addition to the filing of tax returns with the state and federal government, and you should contact your accountant about that):
1. Statement of Information. Every corporation must file a Statement of Information with the California Secretary of State each year during the month of its incorporation (or during any of the five preceding months). For example, if incorporation occurs in February of 2014, the corporation would then file an annual Statement of Information during the month of February, or sometime during the five preceding months, in subsequent years. The Statement of Information deadline should be carefully calendared by the
