Check Your Articles

Contractors, attorneys and design professionals doing business as corporations or professional corporations who engage in more than one business activity should check their articles of incorporation to make certain that they are properly authorized to transact the business or businesses they wish.

This fact was recently emphasized by a Colorado Court of Appeals decision ruling that a lawyer’s professional corporation, which also engaged in providing television commercials to other attorneys’ was prevented from collecting monies allegedly due for its T.V. commercial work. The reason was that the attorney’s professional corporation was only authorized to engage in the practice of law-not advertising and public relations. Network Affiliates, Inc. v. Robert E. Schack, P. A., 682 P.2d 1244 (Colo. App. 1984).

The laws of the State of Colorado applicable to general business corporations allow engagement in any lawful businesses if the corporation’s articles of incorporation so provide.

However, corporate laws relating to professional corporations may be more restrictive. The attorneys’ professional corporation rule specifically restricts corporate activities to the practice of law. The Colorado statutes relating to architectural or engineering professional corporations do not appear to restrict corporate activities of those design professionals to their professional practices. However, their articles of incorporation must specifically allow other activities.

If a corporation is not properly qualified to engage in a particular business, it may be prevented from collecting its debts or from enforcing contracts relating to the unauthorized business activities.

The solution would be either an amendment to the corporation’s articles of incorporation to allow additional business endeavors or the formation of separate corporations or other entities to transact the added business ventures.

Avoid being cornered like the lawyer who lost his own case mentioned above-check your corporate authority.