This Preventive Law Alert was written by: John Goodson, Colleen Manley and Christine Goodson Forakis.

Wealth Preservation and Preventive Law Special Alerts are patterned after an annual publication to all mountain climbers called "Accidents in North American Mountaineering" which writes up all mountaineering accidents describing the accident, what caused it, how it may have been prevented so that further mountain climbing catastrophes may be avoided. Wealth Preservation and Preventive Law Special Alerts are the equivalent of "Legal Accidents in North American Law" – a description of the legal catastrophe and how it may be avoided using preventive law techniques.

Scheming Persons Take Advantage Of Corporations When They Are Inadvertently Dissolved

For some reason, Doomsday Inc., an Arizona corporation, did not receive correspondence from the Corporation Commission telling them that they need to file annual reports. Therefore, Doomsday Inc. failed to file their annual reports and did not realize it until the Corporation Commission advised them that their corporation had been dissolved. When the corporation was dissolved, Doomsday Inc. had to hire their attorneys to file the paperwork to reinstate the corporation. Then something terrible happened: While the corporation was dissolved, and in the process of being reinstated, a scheming individual filed a trade name application to use the name of Doomsday Inc. This required Doomsday Inc. to negotiate and pay off blood money to the person who signed up for their name before they were able to reinstate the corporation.

The way to prevent this is to not use corporations as your business structure. The relatively new Limited Liability Company (LLC) laws allow a Limited Liability Company to check the box on IRS forms to select whether they will be taxed as a C corporation, a S corporation, a partnership, or as an individual sole proprietorship. In addition, the LLC structure gives greater asset protection, and also makes it unnecessary to file annual reports. In most instances, the LLC does not have to prepare annual minutes as would a corporation.

However, there are unique times when you may want a corporation, such as when you have been operating under a corporation that you have had for many years. It may not have been so easy to file annual reports because the Corporation Commission may not have reminded you to do so, and if they did, may have sent the reminder to an incorrect address. Therefore, for our clients, we recommend that they engage us as their attorney to: 1) keep track of annual report filing dates, 2) prepare the annual reports, and 3) prepare annual minutes which are required for keeping a corporation active and up-to-date.

For our client's corporations, we prepare basic annual meeting minutes, leaving it up to the corporate clients to conduct other meetings and prepare the appropriate minutes as necessary in the operation of their business. Clients then know that the minimum requirements for the Arizona Corporation Commission are complied with.

If you own corporations outside of Arizona, you will want to set up similar arrangements with your attorneys. We also recommend that you double protect your corporate trade name by filing articles with the Corporation Commission, and at the same time applying for a trade name with the Secretary of State so there is no way you will lose the name to a scoundrel if somehow you allow your corporation to be dissolved.

We help prevent legal accidents in North America!!

For additional information, please call (602) 252-5110.

www.goodsonmanleyforakis.com

Contact Information

340 East Palm Lane, Suite 300
Phoenix AZ 85004-4610

ph: 602.252.5110
f: 602.257.1883

Or visit us online at www.goodsonmanleyforakis.com