It may seem like a simple thing, but preparing and maintaining meeting minutes for your corporation, LP or LLC is a critical step in maintaining true asset protection.
Without it, business and real estate venture owners are being held personally liable for lawsuits against their corporation, LP or LLC, and are vulnerable to losing their personal possessions. This is such a common problem that 50% of business and real estate ventures are losing this common legal attack because they fail to protect against court decisions that pierce the veil. Failing to maintain meeting minutes is one of the causes of that vulnerability.
Get Your Meeting Minutes Checklist
If you compare the low cost of having your meeting minutes professionally prepared to the protection you gain, it is great value and your money is well spent. To ensure our clients are protected, we complete and file the minutes for clients of Corporate Direct and Sutton Law Center. To make this easier for our clients, we include this Corporate Meeting Minutes Checklist. Simply fill out this downloadable PDF, and click the submit button at the bottom, send the email that appears and we’ll take care of it from there.
What are Meeting Minutes?
To be protected by your corporation, LLC or LP you should hold at least one annual meeting every year. When making major decisions you may have to hold a special meeting for that purpose.
To reflect that you actually held an annual or a special meeting you must write down what was decided – these are called corporate minutes, meeting minutes or just minutes. Your minutes are then placed in the corporate book (sometimes appropriately called a minute book) with all of your other formation documents. When the IRS comes calling during an audit or an attacker is trying to pierce the corporate veil, having your minute book in order is a huge help with these important corporate formalities. It is what we do every day.
Prior to a meeting of shareholders or members, all shareholders and members must receive or waive a notice of the meeting. Prior to a directors’ meeting, all directors must receive or waive a notice of the meeting. In meetings of either shareholders or directors, corporate formalities require voting and an official record of actions taken at the meeting. The official record of actions taken in a any meetings is provided as the minutes of that meeting. Minutes provide a record of the corporation’s resolutions. A resolutions is a document that records actions that the directors or shareholders “resolve” to take on the corporation’s behalf. The nature and timing of the corporation’s decisions dictate whether a resolution or minutes of a meeting provide an appropriate record of decision.
By holding the necessary meeting and preparing the minutes, a corporation provides documentation to protect the corporate veil. Should a creditor seek to pierce the corporate veil at a later date, the corporation’s records will serve as evidence of its separate existence. In addition, maintaining proper records may help to avoid future miscommunications and misunderstandings within the corporation.
What Meetings Should be Documented?
Even if your corporation is run and controlled by you alone or by a small group of people, you should conduct meetings and prepare records of such meetings. Shareholders and directors conduct three types of meetings, which should each be recorded through minutes of meetings. The first type of meeting is the organizational meeting.
The second type of meeting is the annual meeting of directors and of the shareholders, where directors are elected, officers are appointed or reappointed, the past and future of the business is discussed and voted upon, as necessary.
All decisions the corporation makes and actions it takes should be in compliance with the rules established in the Bylaws. Demonstrating that your corporation has complied with its Bylaws indicates that its directors, officers and shareholders treat the corporation as a separate entity with its own rights and limitations. This compliance is also something a court will look at when deciding if your corporation has been operating as a true corporation, rather than a business shell. True corporations have true asset protection.
Finally, the third type of meeting is the special meeting, which can be called for either directors or shareholders. Special meetings are usually called for by either directors or shareholders to deal with urgent business, such as merging with another entity, selling the corporation to another company or group of individuals, changing the authorized share capital of the corporation, or liquidation.