lawyer up to his chin in filesFor closely held companies and small businesses, corporate record keeping seems like just another unimportant and tedious chore. As a result, it is typically ignored by the business owners.

Honestly, it does seem a bit silly. Do you really need to have a meeting with yourself, if you are the sole shareholder? Or with your few other partners who you see daily?

Yes. Even though you are not Exxon, you must still keep your corporate formalities up every year. It takes just a small amount of time and money if you have your lawyer do it, but it can pay off big in lawsuit defense and asset protection. Or, to put it the other way, if you do not, you are subjecting yourself to unnecessary risks because you can be personally sued, personally held responsible for taxes, or even sued by your partners or your corporation’s Board Members and shareholders.

What documents do you need to keep?

  • List of members, past and present
  • Articles of organization
  • Tax returns for the past three years
  • Current operating agreement or bylaws and shareholder agreements
  • Annual meeting minutes with notices
  • Resolutions

Most business owners and managers know that keeping these records is important but may not fully understand the applicable legal requirements and how to accurately document them in a timely manner. In the event of a lawsuit or audit, without the proper corporate documents in place, the business owner can be held personally liable for the actions of the business.

The easiest and most efficient thing is to have your regular business attorney keep up your formal corporate records every year.” A corporate minute book serves as a legal journal, documenting your business’ ongoing corporate activities, decisions, and significant business transactions. It acts as the business’ official repository of all major corporate documents and records. For instance, the minute book should state past and present officers and directors of the business and their dates in which they held these positions.

The minute book will also outline all the business’ stock information, including the types and numbers of stocks purchased and sold, the names of the stockholders, and their dates of ownership. Where applicable, the minute book will also note dividends and compensation to management personnel.

If you do not know what shape your business records are in, consider having a Business Risk Review or an audit by an outside CPA firm (not your normal CPA). Then catch them up before you get sued or audited for real.

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