Do You Actually Have to Observe “Corporate Formalities” in Florida?

When starting a new business in Florida, you need to understand and follow the legal requirements for your chosen structure. If you fail to observe such “corporate formalities,” you may find that you do not enjoy the legal protections you thought you did. The Tampa business organization and structuring attorneys at Bleakley Bavol Denman & Grace can advise you on how to properly set up your new business venture and give you the best possible start for your startup.

Miami Judge: Shareholder Agreement Not Enough to Create Shareholders

There are several types of legal entities a Florida business may use, including a corporation and a limited liability corporation. Each has its own specific rules and procedures that must be observed. For example, the legal formalities for establishing a corporation in Florida are as follows:

• A person (the incorporator) files Articles of Incorporation with the Florida Secretary of State. This legally establishes the corporation’s existence and establishes the number of shares the corporation may issue, as well as the different types or “classes” of shareholders.
• The incorporator appoints one or more directors for the corporation.
• The directors authorize shares to be issued in exchange for consideration, such as money or services performed.
• Once the corporation receives such consideration, the directors then formally issues the shares to the shareholders, which may be represented by certificates.

A recent decision from a federal judge here in Florida, Peyton v. Martinez, illustrates what can go wrong when people try to start a new business entity without observing these formalities. This case involved a failed business relationship between three men with the last names Grant, Martinez, and Peyton. In brief, Peyton sued Grant for allegedly violating a shareholder agreement that the three men signed when they formed a corporation called Nexxt Gen.

But as United States District Judge Marty Fulfueira Elfenbein explained in an August 2025 decision following a bench trial, it turned out that, legally speaking, neither Peyton nor Martinez were actually shareholders of Nexxt Gen. Here is what happened. Grant’s father was the incorporator of Nexxt Gen. But he never held an organizational meeting or appointed directors for the corporation. Nor did the Articles of Incorporation list any other directors or officers.

Since Nexxt Gen never had any directors, the judge continued, there was never any formal authorization of shareholders. Now, there was a “shareholder agreement” between Grant, Peyton, and Martinez. But that agreement did not, and could not, issue any shares in the corporation. It is possible for shareholders to sign a written agreement “to dispense with many of the corporate formalities” required by Florida law, but the judge said there was no evidence of that in this case. As such, the court concluded that Grant’s father was the only known “shareholder” in Nexxt Gen.

Contact a Tampa Business Organization and Structuring Attorney Today

How you choose to organize a new business is often a crucial first step towards success. The Tampa business organization and structuring attorneys at Bleakley Bavol Denman & Grace can advise you on the best approach for your situation. Call us today at (813) 221-3759 to schedule a consultation today.

Source:

scholar.google.com/scholar_case?case=8018683218983820187