An optional yet important step for maintaining your LLC legal status–and the risk reduction it provides–is to hold an annual meeting with members/shareholders and the Board of Directors discuss the major components of the company. If you choose to take this step, recording meeting minutes can give you additional support if your LLC status is ever challenged.
There are a few major reasons why your small business should hold annual meetings, record meeting minutes and keep them in a secure location:
- Liability Protection. Operating as a corporation protects you and other shareholders from personal liability. To maintain that the company is a separate entity from its owners and shareholders, you need to show that the appropriate steps are being taken to appoint board members and directors, consider input from shareholders, and make decisions of a corporate—rather than personal—nature.
- Funding. If you are currently looking for financial backing, or will be in the future, it is important to show potential investors that you are completing all necessary steps needed to remain a corporation. Investors want to see that risk-reduction measures are in place, that that documentation supports these claims.
- Dispute Avoidance. Who is supposed to manage finances? Who handles marketing? Were these official decisions? If owners and/or shareholders begin asking questions, it is important that these topics were previously written down.
- Taxes. The class of corporation you chose when you set up your business needs to be reflected in the annual minutes. You should also include any bonuses and retirement plan contributions that were given, as these can impact your taxes. The directors should also specifically approve any loans to shareholders to lessen the opportunity for the IRS to reclassify the loans as taxable dividends. For this reason, it would be a good idea to have your CPA present at your annual meeting.
Once your company holds its annual meeting and minutes are prepared, you need to keep them in a safe place together with past meeting minutes. All electronic copies should be backed up and secured.
These are a few examples of why annual meetings and minutes are an important part of your business processes and records. It is a good idea to have legal representation present in your annual meetings to ensure that all points are addressed and all conflicts have been resolved.
At LexLaunch.com, we are dedicated to providing small businesses with the legal foundation they need to create a strong and successful future. Have you spoken to a legal representative to decrease risks and protect your business? If not, make it a goal to call the experts at LexLaunch.com today at (816) 434-6610 or click here for more information.