No business owner has become wealthy simply because he or she kept good corporate records. Yet, good corporate record keeping is essential for several important reasons.
1) To protect you legally. When you create a Nevada Corporation, you create a legal entity separate and distinct from you as an individual. That means the corporation is responsible for its own actions. You are not legally responsible for the acts of the corporation, unless it engages in any criminal activity.
Quite often an owner of a business cannot prove that the corporation acted for its own purposes rather than that of the owner personally.
That's why it's important for you to document all of the actions of the corporation. Without well-maintained corporate records, the courts may disregard your corporate status and allow creditors to sue you personally for debts of the business. This is called piercing the corporate veil. This means the courts can conclude that because the corporation did not accept its responsibilities and document its transactions, it is only a sham, or mere alter-ego of its owners. This problem occurs more often than you may think. This inevitably leads to personal as well as corporate liability for the business debts. If your corporation has multiple stockholders, the need for detailed corporate records becomes even more critical. Any one stockholder may quite easily challenge the authority for a transaction. Only complete and accurate resolutions can demonstrate that the action was properly authorized by the stockholders and/or the directors. A corporation can encounter many additional legal problems. Where transactions require director or stockholder approval, then a detailed record of the transaction as discussed and/or voted at a directors' or stockholders' meeting may resolve the dispute in your favor. As an officer or director of a large corporation, you must particularly insist upon accurate minutes so you can prove your actions at these meetings and also show matters you voted against. Because lawsuits against directors are common, you must be able to defend your every action on behalf of the corporation. This is possible only with written proof, and that means good corporate records.
2) To gain important tax benefits. Have the corporate benefits you enjoy been properly voted? Have loans between you and your corporation been authorized in writing? Did you hold the required meetings to decide upon becoming an "S" Corporation or to change your corporation's fiscal year? Do you have resolutions authorizing your own salary?
