Proper due diligence ensures the benefits of the business structure will be upheld if challenged from a legal or tax standpoint.
Electing to be taxed under a corporate structure requires certain formalities. As the old adage goes, if you are going to call it a duck, it had better, look, walk, and quack like a duck. The same goes for your business. Organizing and maintaining your business under a corporate structure requires the owners to exercise proper due diligence in order to ensure that the benefits of the structure will be realized and upheld if challenged from a legal or tax standpoint. In addition to filing the proper corporate documents at the onset to establish a legal structure, there are several ongoing responsibilities that must be done on a recurring basis.
This download summarizes some of the important areas where corporate due diligence must be maintained. In particular, this discussion focuses on S Corporations, although some of the items are also relevant to C Corporations and Partnerships.