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If your company is incorporated, at the very minimum you should have an annual meeting of the board of directors and an annual meeting of the shareholders. If you do hold said meetings, 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 many other reasons, however, for having these meetings and placing the minutes of those meetings in your corporate minute book.
One of the reasons you incorporated may have been to shield your personal assets from the debts of your corporation, to limit your liability, and to take advantage of favorable deductions from your earnings. If you do not maintain the proper corporate records, an adverse party may "pierce the corporate veil" of your corporation and reach you. Likewise, a taxing agency may also disallow corporate deductions in a tax audit, requiring you to pay substantial penalties. One of the ways this is achieved is by investigating whether your corporation is actually conducting business as a corporation rather than as a sole proprietorship or other non-corporate entity. If you fail to maintain the proper corporate records, this is one way an adverse party can prove your corporation is a sham.
There are other reasons why your corporate minutes should be organized and properly prepared by a professional. Auditors from the state franchise tax board, I.R.S. and EDD often ask top review the corporate minute books. In addition, if your business is seeking financing or selling your business, the lender and/or potential buyer often will ask to review the corporate minute books while conducting their due diligence investigation.
It is important that over the course of years your corporate minute book is professionally prepared and kept up to date. If your minute book has been neglected, it may be too late to have this work timely done. Remember, this is preventive law, which means that you can save substantial attorneys' fees, potential liability, fines and/or assessments now for the small costs of maintaining proper records.
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Disclaimer: The information presented on this web site was prepared by Melissa C. Marsh for general informational purposes only and does not constitute legal advice. The information provided in my articles and alerts should not be relied upon, or used as a substitute for professional legal advice from an attorney you retain to advise or represent you. Your use of this Internet site does not create an attorney- client relationship. Transmission of this article is not intended to create, and receipt of it does not constitute, an attorney-client relationship. All uses of the contents of this site, other than personal uses, are prohibited. You may print or email a copy of any information posted on this web site for your own personal, non-commercial, use, but you may not publish any of the articles or posts on this web site without the Express Written Permission of Melissa C. Marsh.
Located in Los Angeles, California, the Law Office of Melissa C. Marsh handles business law and corporation law matters as a lawyer for clients throughout Los Angeles including Burbank, Sherman Oaks, Studio City, Valley Village, North Hollywood, Woodland Hills, Hollywood, West LA as well as Riverside County, San Fernando, Ventura County, and Santa Clarita. Attorney Melissa C. Marsh has considerable experience handling business matters both nationally and internationally. We routinely assist our clients with incorporation, forming a California corporation, forming a California llc, partnership, annual minutes, shareholder meetings, director meetings, getting a taxpayer ID number (EIN), buying a business, selling a business, commercial lease review, employee disputes, independent contractors, construction, and personal matters such as preparing a will, living trust, power of attorney, health care directive, and more.