Forming a corporation is an extremely important task, but maintaining it is just as essential. A compliance task easily manageable is making sure the company’s minute book is up-to-date. The company’s minute book is where all your company’s important paperwork such as state filing documents and company meeting minutes are kept. The Articles of Organization set forth during your organizational formation meeting should be included here, as well as copies of minutes taken at all annual meetings and corporate board meetings. It is also wise to include a current member ledger that tracks ownership of the company, including how much is owned by each member. As you update certain documents or the company makes new corporate decisions, it is important to always record these and place the updated copies in the minute book.
Minutes of meetings are simple to prepare and usually do not require the help of a professional. First, you need to arrange a shareholder's or director's meeting in accordance with the requirements set in your corporate bylaws. After each proposal, write out the decisions approved by the board of directors or shareholders and how it was voted upon, such as majority vote prevails, and place a copy of the minutes in your record book. Please note that you do not need to document everyday business decisions, just mainly those that require a formal board of directors' or shareholders' consent. These include topics such as key legal, financial and tax decisions.
There are several reasons why it is a good idea to keep your minute book handy and current. Even if you are the sole director, shareholder and hold all offices of a corporation, the law requires you to conduct a board meeting and a shareholder meeting annually. If you do not pay attention to these ongoing legal regulations, you may lose the limited liability protection of your corporate status.
Failure to properly document and support important approvals and tax decisions can also lead to a loss of crucial tax benefits. One of the reasons you incorporated may have been to keep your personal assets from the debts of your corporation, to limit your liability, and to take advantage of favorable deductions. If you do not maintain the proper corporate records, someone can launch an investigation to whether your corporation is actually conducting business as a corporation rather than as a sole proprietorship or other non-corporate entity. Likewise, a taxing agency may also prohibit corporate deductions in a tax audit, requiring you to pay substantial penalties.
Also, keeping your minutes up-to-date provides a safe record of corporate transactions and decisions. This can be important if disputes occur. You can use the minutes as documentation to show your directors, shareholders, creditors, the IRS, and the courts what was decided in the meeting and under what circumstances. Also if your company is looking for a loan, or to purchase or rent property, banks, escrow and title companies, property management companies, and other institutions often ask for a copy of a resolution approving the transaction.
It is important that your keep your corporate minutes prepared in an organized manner and kept current. For more information on maintaining or obtaining your corporate record and minute book, check out our Corporate Kit/LLC page or feel free to call us toll-free to help you with the process.
SunDoc Filings is not a law firm. The materials available at this web site are for informational purposes only and not for the purpose of providing legal advice. You should contact your attorney to obtain advice with respect to any particular issue or problem.