Business Litigation Lawyer
One of the benefits of a corporation is that it is separate from your personal holdings, protecting you against liability of the business. Corporations have to act separately from their owners for their owners to enjoy this benefit. Corporations have board meetings that help maintain this separation. When small businesses don’t hold these meetings, it can create issues for the business. Let’s discuss board meetings to help your business stay compliant.
How Often Should Your Shareholders Meet?
At the very least, your corporation should have an annual meeting. This meets the IRS requirements for S Corp tax treatment. Typically, the annual meeting is held after the fiscal year has ended because one of the biggest activities at the annual meeting is to review the financial information. There may be other activities, such as voting on transactions or appointing members to the board, but generally speaking, the annual meeting is about the status of the organization.
How to Document the Annual Meeting
Corporations should keep these minutes for seven years to document their activities and prove to the IRS, if needed, that they are operating according to the guidelines. There is no requirement to file the minutes of the annual meeting with any government agency, but you should keep the minutes anyway. During the annual meeting, the secretary takes minutes of the meeting. Here’s what to include:
- Date, time and location of the meeting
- Who attended (who was absent)
- Description of the agenda items
- Details about what was discussed
- Results of voting, who made the motion, was it seconded, etc.
- When the meeting was adjourned
What Is the Penalty for Not Holding Meetings or Keeping Minutes?
Commingling personal and business assets is one way to get in trouble, tax-wise. Corporations have a duty to shareholders, so keeping things separate is more important for corporations than LLCs or DBAs. When you don’t hold annual meetings and track minutes of those meetings, you jeopardize your corporation’s status. Your entire board of directors could be held personally responsible for the actions of the corporation. The IRS could impose individual tax rates, rather than a corporate tax rate.
A business lawyer can help you set up business meetings and ways to update minutes to protect your corporation. As a business litigation lawyer from Eric Siegel Law can attest, it’s a small thing that could go a long way towards showing that your corporation is acting reasonably and legally.