When a business operates as a sole proprietorship or as a partnership, there are few legal and tax regulations that must be followed. However, if that business converts to a corporation, a number of things change and the owner(s) must adhere to these new expectations or run the risk of having the corporate form of organization legally disregarded. When a corporation is legally disregarded, the law treats it as though it does not exist. In a worst-case scenario, this means that the limited liability protection provided by a corporation is lost, and the owners can be held liable for the debts and acts of the corporation.

Keep in mind that a corporation, whether an S corporation or a C corporation, is a legal entity separate and distinct from its owners. This is unlike the situation with a Read More