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Prepared By: Melissa C. Marsh, Los Angeles Business And Corporate Attorney
Written: January 2009

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.

Related Articles:

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• How to Hold and Document a California Corporation's Shareholder and Director Meetings and Minutes
• Corporate Meeting and Minutes Compliance Plan Service
• A California Corporation Provides Asset Protection, But It Can Be Lost - Piercing the Corporate Veil

© 2009 Melissa C. Marsh. All Rights Reserved.