Most people starting a business know they need to protect themselves by using a business entity. They question is which one. A quick pop onto the internet will produce a ton of articles suggesting you should do this or you should do that. When it comes to corporations, one of the knocks against them is the corporate formalities that must be complied with. The question is whether this is really that big of a deal these days.

I will start off with a word of warning. There is no federal law per se on business entities. Instead, each state has its own laws and, of course, they are different from state to state. They just couldn't make things easy! Regardless, I'll be discussing generalities in this article and you should always check the specific requirements of your state before proceeding. This is true for any type of business entities.

Okay, so are corporate formalities really a big deal and a burden to small business people? The answer is yes and no. There are very definite formalities regarding what needs to be done when the entity is formed. This includes issuing bylaws, shares and complying with securities laws for the sale of shares in the entity. Get these wrong and you run the risk of the entity being attacked as invalid later down the line when some dispute arises. Given this, I usually suggest it is money well spent to have an attorney set up the corporation just to be sure you don't have any problems.

What about after that? Well, the formalities really aren't all that big of a deal. You need to have a board meeting every so often, but at least once a year. This isn't any great difficulty. You simply give notice, and gather everyone to cover the topics in question. Board members can attend by phone and it really isn't a huge deal to have a secretary keep notes and then write them up for inclusion in the corporate book.

The other area that is often groaned about is the financial reports of the company. You should have a balance sheet and be running profit and loss statements and what have you. This used to be a real pain in the derriere. Then this magical contraption called a computer was created. Most people now keep their books on the computer using software that automatically kicks out the reports in question. This has pretty much put an end to the problem of keeping books.

Are corporate formalities something you don't have to worry about? No. That being said, they are not nearly the negative that some sites would suggest.

Thomas Ajava writes for <a rel="nofollow" href="http://www.advantagesdisadvantagesofcorporations.com">AdvantagesDisadvantagesofCorporations.com</a> - where you can find out about the advantages and disadvantages of corporations as well as read other <a rel="nofollow" href="http://www.advantagesdisadvantagesofcorporations.com/Information-Articles-Corporations">articles on corporations</a>.