When shareholders invest into a corporation, there is an expectation of limited losses amounting to the financial investment made. However, if the company is not properly run, officers, directors and shareholders are exposed to the blade of the law. This is known as piercing the corporate veil. Therefore it is critical for any shareholder, director, or officer of a small corporation to understand what is required to protect your personal assets from exposure to creditors and the long arm of the government.
Corporate formalities is the process of maintaining the corporation status in a legal manner. Corporate formalities include the annual fling with the State Corporation Commission or the State Secretary; having regular meetings, maintaining a set of by-laws, and managing the company in a professional manner.