Corporate Basics: Turning Fundamentals Into a Routine Matter

EMS organizations typically dedicate a lot of time and energy to routine maintenance. From pre- and post-shift checksheets to weekly vehicle inspections and monthly drills, testing and retesting equipment on a regular basis is fundamental to the EMS way of life. Yet these same organizations are notorious for their lack of attention to corporate basics. Although it is deeply ingrained on the operations side, for many squads the intensive maintenance model breaks down at the boardroom door.

Neglecting corporate basics can expose your organization—and in some cases, its directors and officers personally—to significant risks. This article discusses a few key areas of corporate basics and suggests some strategies for keeping the corporate fundamentals in good health. Setting up a routine and sticking to it is the easiest and best way to avoid the neglect that can lead to problems.

As a preliminary note, references in this article to officers mean corporate officers such as the president, vice president, secretary and treasurer. Line officers such as captains, lieutenants or crew chiefs may be, but are not necessarily, corporate officers. Whether line officers are also corporate officers is a judgment that qualified legal counsel should make on a case-by-case basis.

Also, remember that each squad is unique and that one-size-fits-all solutions are rarely the best solutions. The suggestions in this article are made for educational purposes and are not intended to be legal advice or create an attorney-client relationship with the reader.

Why Bother?

In general, keeping corporate house is just good policy. Just like equipment checks and quality improvement, a faithful adherence to periodic reevaluation and reassessment should become part of your agency’s culture.

Of course, keeping a corporation in line takes concentration, patience and a great deal of attention to detail. Many EMS services stretch resources to the max just to make calls. Few have an abundance of time, energy or personnel to dedicate to an area easily viewed as “formalities” or “legal mumbo-jumbo.” It may not be enough to say that minding corporate requirements is good policy. Here are some of the risks of not doing so:

Piercing the corporate veil—The primary function of a corporation is to provide a liability shield for the individuals owning and/or running it. A judge can set aside that shield, however—referred to as piercing the corporate veil—if the corporation is not run properly. As a rule of thumb, if you treat your corporation as if it doesn’t exist, it’s quite possible that a judge will treat it the same way. Piercing the corporate veil exposes the personal assets of directors and officers to liability.

Personal liability for not-for-profit directors and officers—Directors and officers of not-for-profit corporations are often not as protected against personal liability as they think, even when corporate formalities are observed. In New York, for example, directors can be called to account for neglecting to perform their duties in the management of corporate assets, and can face personal liability for acts constituting gross negligence or intentional misconduct. State law can provide some protection for corporate leaders of not-for-profits, but exceptions are numerous, and the consequences of violations are serious.

IRS implications—Lax organizational leadership can lead to trouble with the IRS. A tax-exempt corporation that drifts from its “exempt purpose” risks tax liability and additional monetary penalties.

In severe cases, the IRS may revoke the tax exemption and seek payment for previous years’ taxes that should have been paid.