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Home  Articles Corporate & LLC Resolutions
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Corporate & LLC Resolutions |
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How could you lose in "saving time and money" by not promptly updating your corporate minutes?
- Corporate meeting minutes are crucial to why you formed a corporation.
- Proper, timely corporate minutes help protect personal assets of owners and officers.
- Corporate resolution form
The IRS can win:
In an audit, the IRS often reviews minutes in your corporate record book, searching for discrepancies between the corporate resolutions adopted by the shareholders and board of directors and the actions of the corporation.
Without proper authorization in the minutes and accurate expense records, the IRS may reclassify expense reimbursement as dividends. Thus, you would have taxable income plus penalties and interest.
Without proper authorization in the minutes and written loan agreements, loans from a shareholder to the corporation can be reclassified as additional capital contribution. Therefore, the loan principal repaid to shareholder would be a dividend, resulting in taxable income plus penalties and interest.
Creditors and plaintiffs can win:
Plaintiff's attorneys in a lawsuit may use the absence of corporate meeting minutes to prove that the corporation was NOT treated by its officers and shareholders as a separate legal entity from themselves. How?
Inadequate corporate minutes can demonstrate that the officers and shareholders repeatedly acted without the authorization of corporate resolutions. Like commingling corporate and personal money or assets, actions without required corporate resolutions evidence a disregard for corporate formalities. This helps attorneys to 'pierce the liability veil' which means they are able to overcome the corporate shield against personal liability. Losing the corporate shield means that officers or shareholders can be named in a lawsuit and held personally liable for all debts and liabilities, including judgments, of the corporation.
Think you have plenty of time to catch up your resolutions? Do you know how? It is relatively to easily catch up all those ‘lost’ years at the Corporation, LLC & Partnership. But it must be done before your records are reviewed as part of an audit or suit.
Most state laws do not require limited liability companies (LLCs) to maintain meeting minutes. However, it is still a a good idea to keep resolutions and minutes for the LLC. It is the easiest way to prove to the IRS or a court that you have treated the LLC as separate from yourself. In other words, separate from you doing the business or investments personally.
Here are some rules of thumb for doing minutes and resolutions in the future-
- keep it simple and to the point. Don’t elaborate on the discussion behind the decision. Such discussions could be used against you in court.
- make it clear that the board of directors, members or managers exercised their fiduciary duties of care and loyalty.
- specify voting results for each resolution.
- minutes should be generated in a timely manner immediately after a meeting or shortly thereafter, not months or years later.
- use accepted format standards.
If your corporation or LLC has a small number of owners, board of directors or managers, the consent form can be quick and effective way to document decisions without a formal meeting. |
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