Organization and Governance
Whether you are stock corporation, non-stock corporation, limited liability company or a partnership, it is recommended for both tax and liability purposes that you follow governance formalities. In the case of corporations or Limited Liability Company (LLC), to get the benefit of limiting your personal liability, you must "act like a corporation." Specifically, shareholders of stock corporations and Members of LLCs, as well as directors of corporations, should meet regularly to address various corporate matters such as the election of officers and directors, approving major upcoming events, and otherwise reviewing and ratifying actions taken by members, directors and officers - such as signing a new lease, establishing a retirement or employee benefit plan, opening a bank account, changes in ownership, and the like. These meetings should be held at least annually, bur preferable more often - and at least once each year "in person." Holding these meetings is not just "good corporate practice," but it will support the limitation on your personal liability enjoyed by directors and Members of corporations and LLCs - a feature that must be paramount to your business, and will greatly enhance the chances of acquiring a "clean" audit from the IRS if your corporation or LLC were to be audited.
Good corporate practice need not be complicated or time consuming, nor does it require a formal meeting for every action. Between formal meetings Members, officers and directors can propose resolutions to be approved by a unanimous written consent circulated and signed by all shareholders, members or directors, as the case may be. We at Cook Craig & Francuzenko, LLC can review your corporate records and/or prepare records of action based upon a summary provided by you of the major corporate events to be addressed.Corporate Records and Minute Books
We have learned over the years that clients will sometimes attend to these matters but not maintain a formal Minute Book. We recommend to our clients that they gather notes, records or even "minutes" recording actions or other descriptions of actions taken, and forward them to us so that we can prepare them for approval at the next meeting, and file them among the corporate records either in a Minute Book (that we often maintain in our offices) or in the corporate file that we maintain, as appropriate. These corporate records (Minutes) should contain information on officer's salaries, real estate leases and sales, construction contracts, lawsuits, patent applications, the issuance of new stock, the purchase of Treasury stock, and information relating to restricted stock options. From time to time it is worthwhile reviewing the Minute Book on a "taxable year" basis, as well as on a multiple year basis, to ensure that all matters necessary for a complete and accurate audit (if one were ever to be called for), would result.