Failing to maintain corporate formalities is one of the most frequent causes of the corporate veil being pierced if you are not a Close Corporation. The problem is that small business owners are busy running their businesses and frequently fail to hold their meetings or keep minutes of those meetings (however infrequent) that they do hold, exposing their personal assets to the corporation's liabilities. The California Close Corporation is designed to alleviate that risk, by allowing the shareholders of the corporation to sign an agreement with the corporation that the requirement of annual meetings be waived. That's right, the annual meeting requirement is waived! The benefit of this is obvious and can potentially save your personal assets from exposure to business liabilities. This is not to say that there aren't good reasons to still have meetings and keep minutes of them (speak with your attorney or CPA about this), but now not doing so will not destroy your business.

In addition to improving the liability protection of your corporation, a close corporation's principals can elect to merge their multiple offices (shareholder, officer and director) into one office called a “Manager”. The benefit in doing this is improved simplicity in running the business. As a manager, the corporate owner can act in every capacity authorized under the bylaws and California law without having to worry about whether she or he is technically authorized to do so. In a Close Corporation, the managers simply run the business, period.

If you choose to form a Close Corporation, in addition to all of the other incorporation documents prepared for you, CCC will prepare a Shareholder's Agreement, waiving the requirement for annual meetings and converting the shareholders, officers and directors into “Managers”. CCC will also include a buy/sell provision in the Shareholder's Agreement, which addresses the issue of shareholder sales and other transfers of their corporate stock, at no additional charge. If you desire to add additional provisions to your Shareholder's Agreement, especially if such provisions will cause shareholders to be treated economically differently, please consult with your attorney and tax advisor.

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