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BY: Ann Pettigrew
(Part II of our Corporate Law Series)
Okay. I like Shakespeare. Not going to apologize for it. He was, I’m quite sure, a corporate paralegal at heart. And that brings us to today’s tips for being a corporate paralegal. The method in the madness. Looking at corporations from the outside, many people think that it’s sheer madness. Sometimes it is. But there is always a method in the madness, and that’s what we’ll look at in this part of the series.
When most people think of the term “corporate paralegal,” they automatically think that all we do is work on corporations. Corporate law, however, encompasses many more aspects of the law than people think. You have to look at what a corporation is and what it does. A corporation is an entity that really has a “life” of its own. For the sake of brevity, I’m using the term “corporation” interchangeably for any type of entity (limited liability company, special purpose corporation, partnership, limited liability partnership, etc.).
Let us start at the beginning. Why incorporate? People incorporate a business for two major reasons: to be protected against personal liability, and to take advantage of tax deductions. If you have a business and it’s unincorporated, you could be on the hook if something went wrong, even if you’re not the cause of the problem. Innocent people still have to pay to defend themselves.
Then there’s the decision about where to incorporate. A large number of Fortune 500 companies incorporate in Delaware. Delaware is probably the preeminent place of incorporation since it is about the most business-savvy state in the country, and it has a court solely dedicated to resolving business disputes. (Sidebar – when you have a chance, read up on the history of the Delaware Court of Chancery [high court of equity]; interesting stuff for history buffs!) In addition, unlike some states, Delaware does not require that officers or directors actually reside in Delaware.
So, now we’re incorporated in Delaware. But our business operates in Texas and, since our product is in such demand, 30 other states. So should we incorporate in Texas and the other 30? Hint: trick question. Answer: Nope. You’re already incorporated in Delaware, so you can’t “re-incorporate” in the states where you’re actually doing business. Why not? Think of it this way. Incorporation is like a marriage. A corporation can only be “married” to one state without committing bigamy. But a corporation can have “platonic relations” with other states and countries. This is termed as “registering to do business” in another jurisdiction. (Let’s not dwell on the moral implications; it is what it is!)
And you thought corporate law was simple, right? Think again, my dear. Think again. For the corporation to do all that it can do, its governing body is going to have to deal with individual state qualification requirements, real estate, compensation, taxes, good will, employment taxes, interstate commerce, securities, labor laws, indemnification, contract law, intellectual property, etc., etc., etc. And did I mention that all of the above is just representative of running a corporation at the state level? We’ve not even delved into city, county, parish, township and neighborhood dogcatcher requirements!
Think of the performer who keeps a row of plates spinning and balanced on thin poles. That’s what you’ll look like most days. You’ll be running from pole to pole making sure that the plates keep spinning. At times, they’ll wobble, but you have to keep those plates suspended and spinning. How do you do all of that? Well, as the Bard of Avon would probably tell you, that’s the madness in which you must have method.
There is no way that you can possibly know all of the laws in which your corporation must operate. That means you’ll have to be a good coordinator. You will manage outside counsel, registered agents, other departments in your corporation; all under the supervision and direction of the attorney for whom you’re working. And while it’s good to have others to help you do this, it is your task to make sure that these matters are handled correctly. If you don’t have a grasp on what you need done, how will you effectively coordinate its completion?
That’s where your corporate “bible” comes into play. Method, method, method, method. Method to the madness. Your corporate bible should tell you the status of your corporation and its subsidiaries at a glance. Your corporate bible can be in either electronic or paper form, or both. Whichever form you choose, it must be fluid, understandable and highly organized. Keeping those plates spinning is not a trick for the faint of heart. If just one of those plates falls, your corporation may be subject to fines, penalties and – ouch – criminal and civil prosecutions against your officers, directors and employees. (Sidebar: When I was on the litigation side of things, I used to love those corporations that didn’t take corporate governance seriously. If you were able to pick apart their structure, you could get to the real money! On the other hand, I hated those corporations whose corporate paralegal looked at governance with strict compliance and ethics. They could ruin a good lawsuit!)
When you become a corporate paralegal, put a plan together that helps you know what needs to be done during the year. Then drill it down so that you have a monthly road map. Yes, you’ll have a registered agent that will take care of all of your filings, but registered agents make mistakes. You must be on top of them. Sure, outside counsel may handle intellectual property filings, but you have to be on top of them as well. Do they have everything they need for the filing? When do your patents, trademarks, etc., expire? Put those dates in Outlook (or another automatic calendaring system), and send out reminders to every Tom, Dick and Harry to make sure that it is done. And document what you do and why you did it.
What you learned about corporations in your paralegal program may not show you all of the intricacies of this practice. You will never stop learning, because the law will never stop changing. I know that my first paralegal program didn’t cover everything. But it did teach me to be curious. It taught me that even though I didn’t have to know all of the law that I would deal with, I should still know how to find it, digest it and direct its application. And I still do that to this day.
Don’t let all of this scare you. Take a deep breath, stand up, and dive right in! As I hope I’ve made clear, though this be madness, yet there is method in’t.
Please feel free to share your thoughts with us, TPS readers! As always, we welcome your insights, comments and feedback. Perhaps there is a professional tip or some additional information you would like to share with our readers regarding corporate law or your personal experience in that area? Maybe you want to tell Ann what you’d like to learn more about? We’d love to hear from you.