Traditionally, owners of closely-held corporations tend to see the required annual meeting as a nuisance. Indeed, the minutes of these meetings often reflect that little more was discussed than the fact that the meeting was held and that officers and directors were elected. While it is important to make sure the corporation is respected as a separate legal entity, it is also important that corporate minutes reflect discussions and decisions that support the positions taken by their owners.
Important actions may include the accrual of bonuses, retirement plan contributions and the ratification of key actions already taken by the corporate officers.
Although the annual meeting date is typically set by the bylaws as 12 months after the date the business was incorporated, it sometimes makes sense to move the date to within one or two months before the corporation’s tax year end. By doing this, the meeting can be used as a tax planning session. The current year’s business operations can be reviewed, the legal and tax advisors of the corporation can meet and tax planning needed before year end (such as establishing a qualified pension plan, setting up fringe benefit programs, etc.) can be accomplished.
Furthermore, keeping corporate minutes should be an integral part of your risk-management strategy. In the unfortunate situation that you are subject to a lawsuit or a government investigation, your corporate minutes can help interested parties retrace your company’s steps. Furthermore, good practices in keeping minutes can help prevent plaintiffs from piercing the corporate veil and holding you personally liable.
Developing consistent minute-taking practices is one of the best ways to protect you and your company. In our experience, many companies do not have consistent policies on taking minutes at their various meetings. Further, some take minutes when they are not needed and neglect to take minutes during meetings at which important decisions are made.
In order to determine whether you are taking minutes appropriately, take a look back at your past minutes. We recommend that you at least review last year’s minutes to determine whether minutes are being kept at the appropriate times, whether you are capturing the proper details, and whether your training programs are sufficient. From here, you can make a plan going forward. The goal is to develop a policy that captures all of your company’s important decisions by taking minutes at the appropriate times. You must also train your staff to make sure that the appropriate details are being captured.
Because carefully drafted corporate minutes are an integral part of the tax and legal records of a corporation, we would like to provide you with a checklist to ensure that your minutes are prepared in a tax-effective manner. To receive your free Tax-Effective Corporate Minutes Checklist, please contact our office.