IF YOUR COMPANY IS INCORPORATED, DOES IT, AT THE VERY MINIMUM, HAVE A MEETING OF THE BOARD OF DIRECTORS AND MEETING OF THE SHAREHOLDERS AT LEAST ONCE A YEAR? AND IF IT DOES, DO THE MINUTES OF THESE MEETINGS APPEAR IN THE CORPORATE MINUTE BOOK?
Even if you are the sole director, shareholder and hold all offices of a corporation, the law requires you to conduct, at least annually, a board meeting and a shareholder meeting. There are other reasons for having these meetings and also placing the minutes of those meetings in your corporate minute book.
One of the reasons you incorporated in the first place may have been to shield your personal assets from the debts of your corporation and TCPA, limit your liability, and to take advantage of favorable deductions from your earnings. If you do not maintain proper corporate records, an adverse party can “pierce the corporate veil” of your corporation and reach you, and a taxing agency may also disallow corporate deductions in a tax audit, requiring you to pay substantial penalties. One of the ways that this is done is to investigate whether your corporation is in reality actually conducting business as a corporation rather than as a sole proprietorship or other non-corporate status. If you do not maintain proper corporate records this is one way an adverse party, including the taxing authorities, can prove your corporation is a sham.
There are other reasons why your corporate minutes should be organized and properly prepared by a professional. Many times each year we have auditors from the state franchise tax board, I.R.S. and EDD in our office reviewing the corporate minute books of our clients. Also, If your business is seeking financing or you are selling your business, many times the lender and/or potential buyers are in our office reviewing clients’ corporate minute books while conducting their due diligent investigation.
It is important that over the course of years your corporate minute book is professionally prepared and kept up to date. If it has been neglected, it may be too late to have this work timely done when you need it the most. Please contact our office if you have failed to maintain your corporate minute book or you need assistance in preparing the minutes of the corporate meetings and records on an annual basis.
REMEMBER, THIS IS PREVENTATIVE LAW, WHICH MEANS THAT YOU CAN SAVE SUBSTANTIAL ATTORNEY’S FEES, POTENTIAL LIABILITY, FINES AND/OR ASSESSMENTS NOW FOR THE SMALL COSTS OF MAINTAINING PROPER RECORDS.