Corporate Compliance   Meeting Minutes Minutes are legal records that document actions and approve business decisions made by the principals throughout the year. Minute records serve as an essential tool in establishing legal separation between owners and their companies, thus protecting them from liability. All 50 states require, by law, that shareholders prepare and maintain annual minutes.

Compliance Powerpoint Presentation Annual Minutes information form

Why Should You Keep Minutes? It's the law State law requires corporations to prepare annual minutes of the shareholders. Additionally, Board of Directors minutes are necessary to document actions taken on behalf of the corporation throughout the year and serves as a track record to document what business has transpired and to confirm the approval of the officers and directors decisions. Without current and complete minutes, the shareholders, officers and/or directors could be held personally liable for the actions of the corporation. Even worse, the legal protection could be in jeopardy if a creditor successfully pierces the corporate veil due to the corporation's failure to keep complete minutes. Protect the Corporate Veil As a general rule, a corporation may be disregarded if it does not maintain a separate identity from its shareholders. In determining whether the corporation has maintained its separate identity, courts consider the degree to which the corporate legal formalities have been maintained, and the degree to which individual and corporate assets and affairs have been commingled. United States v. Van Diviner. One of the specific factors considered in determining whether a corporation and its stockholders have maintained their separate identities is the failure to maintain adequate corporate records or minutes. In numerous cases, the failure to maintain corporate minutes has contributed to the piercing of the corporate veil by courts. N.L.R.B. v. Greater Kan. City Roofing. Without proper records, creditors may "pierce the corporate veil" and sue the shareholders, officers and/or directors personally for the debts and actions of the corporation. If you cannot provide proper corporate documentation, then liability could extend to you and the IRS may also disallow tax benefits resulting from actions not properly documented in the corporate minutes. Without Minutes Failure to maintain corporate minutes can cause a corporation to lose its liability shield and has been cited as a contributing factor to piercing the corporate veil in numerous cases. Below are citations from actual cases where businesses did not have properly documented minutes, for more information, case law summaries can be read from the BizMinutes website (http://bizminutes.com/consequences.aspx): As a general rule, a corporation may be disregarded if it does not maintain a separate identity from its shareholders One of the specific factors considered in determining whether the corporation and its stockholders have maintained their separate identities is the failure to maintain adequate corporate records or minutes Failure to maintain minutes for meetings of the corporation's board of directors or records of the corporation's elections can result in disregarding corporate structure Creditors can reach the assets of a corporation and the corporate entity could properly be disregarded without corporate records and minutes documentation The corporate entity can be disregarded if the corporation fails to keep minutes With evidence of inadequate corporate records and failure to maintain minutes a corporationÕs veil could be pierced Courts discuss the importance of keeping corporate records, including minutes As you can see, it is very important for the shareholders, officers and/or directors of a corporation to keep proper corporate minutes. Failure to do so can contribute to personal liability. General FAQ: For complete Q & A, additional Compliance and Meeting Minutes information, visit BizMinutes, LLC a nationwide compliance service Q: Am I required to have minutes and why is it important? A: Yes - the law requires a corporation to hold an annual meeting of the shareholders Q: Do LLCs need to prepare minutes? A: It is always important to formally document the actions taken by the members of the company as have proof of those agreements. Some states require an annual meeting of the members. Q: What if the shareholders and directors are the same people? A: The rules don't change if you have a one-person business or several partners. Q: What happens if I don't prepare minutes? A: This could result in personal liability to the owners or officers/directors/members, loss of crucial tax benefits and a court could disregard the companyÕs existence. Q: What happens if the IRS audits me and I don't have minutes? A: The IRS will be less inclined to side with you on any tax disputes such as salaries or bonuses paid to the shareholders or fringe benefits, and the IRS may disallow your deductions.

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