February 22, 2015 by Aaron Scott Young
Minutes are legal records that document actions and approve business decisions made by the principals of the business throughout the year.
It’s imperative to have a documented paper trail that separates the owners from the company.
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 serve as a track record to document what business has transpired, and to confirm the approval of the officer’s and director’s decisions.
Although some state laws do not require LLCs to have minutes, it is recommended to document the actions approved by the members and/or managers. Also, it is common in an LLC for the Operating Agreement to indicate a requirement to prepare Minutes.
Minutes include important items such as:
• Annual Meeting of the shareholders
• Election of or changing officers and directors
• Changes in bank accounts (authorized signers, new accounts)
• Filing for S corporation election
• Recording tax decisions and benefits
• Retaining professionals such as a CPA or lawyer
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.
A corporation may be disregarded if it does not maintain a separate identity from its shareholders through corporate formalities. In fact, there are over 80 reasons the courts can disregard the legal protection of a corporation. Read the 10 most common mistakes.