| PURPOSE OF MINUTES Paper Trail. Minutes create a paper trail that shows auditors (IRS) and litigators (Courts) that a business is, in fact, a fully operating and compliant business. Without minutes, Limited Liability Companies and a Corporations have been stripped of their business status and owners and officers penalized, higher taxes assessed, and liability protection removed. It is extremely important that any LLC or Corporation, no matter how small, even a one-person entity, keep minutes of decisions and major actions. Written Record. Your LLC or Corporation must have a written record of all important decisions (either by the Members/Managers or by the Shareholders/Board of Directors). Failure to keep minutes up to date and resolutions documented can have serious consequences, especially with the IRS and courts, Many LLCs and Corporations that are non-compliant (up-to-date with records and minutes) are disqualified and members and shareholders left with extensive tax obligations, THERE ARE TWO TYPES OF MINUTES Formation Minutes
LLC: The meeting held to decide upon the name of the company, the members, registered agent, company shares, capital investment, and other formation and organizing issues. At this meeting, the Operating Agreement is covered and agreed upon by the initial, forming members. In addition, it will be decided at this meeting whether the LLC will be a member-based and run company, or whether it will be a manager-based and run company. Lastly, it will be decided who will fill what roles: members, managers, officers, such as Treasurer and Secretary. All decisions (resolutions) must be dutifully recorded and the minutes signed by the authorizing member.
Corporation: The initial meeting to form a corporation is similar in nature and content to that of the Limited Liability Company, except that Shareholders (not members) make the decisions, Directors are appointed, and Officers elected. After you form your corporation, make sure to call and organize regular shareholder and director meetings, as well as document important corporate resolutions (decisions). Regular Minutes
LLC: When members (or managers) meet, you must prepare minutes to document any actions taken at the meeting. Generally speaking, these minutes may be brief and cover basically the resolutions agreed upon by the members.
Corporation: When Shareholders, or Directors, or Officers meet to discuss corporate business, either in annual, semi-annual, quarterly, or special type meetings, Minutes should be kept of decisions made. COMPANY DECISIONS Pre-Meeting: Determine whether a meeting is an actual, physical meeting of those involved, or just a “paper” meeting. Call and organize meetings, authorize key transactions and keep your records up to date Primary Paper Trail: Meeting minutes are the primary paper trail of a company’s legal life, it's important to know when and how to prepare these minutes, and they should definitely include major company or corporate decisions, from entering into a contract to opening a bank account. This list should include:
• Meeting Summary Sheets
• Call of Meeting forms
• Meeting Participant Lists
• Notice of Meeting forms
• Waiver of Notice forms
• Acknowledgment of Receipt of Notice of Meeting
• Certification of Mailing forms
• Shareholder Proxy forms Minutes Should be kept for the following meetings. There are numerous types of meetings help by a Limited Liability Company or a Corporation. Minutes must be kept of each meeting.
• Minutes of Annual Meeting of Members
• Minutes of Special Meeting of Members
• Minutes of Annual Meeting of Managers
• Minutes of Special Meeting of Managers
• Minutes of Annual Meeting of Directors
• Minutes of Special Meeting of Directors
• Minutes of Annual Meeting of Shareholders
• Minutes of Special Meeting of Shareholders A Minutes Record should be kept of the following actions. Every decision made by the members, managers, and officers of an LLC, or of the Shareholders, Directors or Officers of a Corporation should be kept.
• Approval of Minutes of Members Meeting
• Approval of Minutes of Managers Meeting
• Approval of Minutes of Shareholder Meeting
• Approval of Minutes of Director Meeting
• Authorization of Treasurer to Open and Use Accounts
• Authorization of Treasurer to Open and Use Specific Company Accounts
• Authorization of Company Account and Designation of Authorized Signers
• Authorization of Rental of Safe Deposit Box
• Adoption of Assumed Company Name
• Member Approval of Proposed Contract
• Approval of Lease
• Purchase of Real Property
• Resolution Authorizing Sale of Company Real Property
• Approval of Company Tax Year
• Payment and Deduction of Organizational Expenses
• Written Consent to Action Without a Meeting
• Certification of Member or Manager Action
• Affidavit of Member Decision-Making
• Acknowledgments
• Board Approval of Transaction Benefiting a Director
• Directors' Written Consent to Transaction Benefiting a Director
• Shareholder Approval of Transaction Benefiting a Director
• Shareholder Written Consent to Transaction Involving a Director
• Certification of Board or Shareholder Action
• Affidavit of Corporate Decision-Making Important to Know
LLCs and corporations are the most used form of business entities in the United States. While many people form one of these entities, most do not understand the corporate minute requirements.
• A valid meeting cannot be held without a quorum. A quorum is the minimum number of members or directors who must be present to hold a valid meeting and take action.
• Minutes must be kept at all meetings of Members, Managers and Officers of an LLC
• Minutes must be kept at all meetings of Shareholders, Directors, Officers and Managers of a Corporation KEEPING THE BUSINESS COMPLIANT Stand Alone Business
LLCs and corporations are stand alone business entities. They are favored as a business form by many people because they provide extensive protection for business debts. These debts can include judgments from lawsuits and debts owed to vendors. The basis for this protection is the fact that LLCs and Corporations are considered to be an individual separate from the members or shareholders. Legal Fiction of a Business
The legal fiction of individuality of the LLC or corporate entity is not absolute, and the idea of a separate individual can be challenged. In a corporation, this process is known as piercing the corporate veil of protection—in an LLC, it is known as setting aside the liability protection. Remaining Compliant
Assuming that members of an LLC or shareholders and board of directors of a corporation take the necessary steps to keep the business healthy, there has to be some proof that the steps were taken. Naturally, this brings us to the Minutes. These minutes, whether in an LLC or a corporation, are simply the record of when meetings occurred, who attended, what was discussed and what decisions were made. The minutes of the meeting are kept by the Secretary of the company. He or she then presents them to the Members in an LLC, or to the Board of Directors in a corporation for approval at the next meeting. Assuming the minutes are approved as being accurate, they are then filed in the Minutes or Record book where they remain until the sun runs out of fuel. In keeping Minutes
The Secretary should follow the requirements listed in the Operating Agreement of the LLC, or the Bylaws of the corporation. However, in small businesses, the Secretary can usually get by with simply recording a summary of the subjects discussed at the meetings, who was there and the decisions made with the vote count for each decision being noted. With larger businesses, the minutes should be handled in a manner that strictly follows the dictates in the Agreement or Bylaws. Resolutions
The listing of resolutions, which is nothing more than decisions made by the members/managers of an LLC, or by the Shareholders, Directors, or Officers of a corporation, may sound a bit confusing or difficult when you first hearing about them. However, they really are not--especially when one uses the formats provided in the purchase of LLCs or Corporations from us. UNDERSTANDING RESOLUTIONS | |
