You’ve incorporated, congratulations, now what? Part of running a successful business is keeping up with the internal details; running your company like a real company. It’s called corporate compliance and while it isn’t everyone’s idea of fun it’s absolutely necessary. Without comprehensive compliance policies in place, your business could end up in some serious trouble.
Corporate compliance can look different depending on the type of entity, but most include the following:
- Articles of Incorporation or an Operating Agreement
- Stockholder or membership stock certificates
- Publish notice of formation (where applicable)
- Issuing of shares
- Hold and document initial meeting of directors
- Hold and document initial meeting of shareholders
- Obtain Employee Identification number (EIN)
- Obtain business license (if applicable)
- Open business bank account and credit card
When it comes to ensuring your business is dotting all its i’s and crossing all its t’s, you need to have programs that are planned out well and implemented properly, with everyone involved thoroughly trained to ensure nothing falls through the cracks. Every state requires a corporation to have an annual (or regular) shareholders’ meeting. This meeting is necessary to elect the Board of Directors and to conduct other regular business – See more at: Corporate Meetings and Minutes.
Doing things by the book, so to speak, can help keep your business safe. Corporate books are a great example of the protection corporate compliance affords. Properly kept books will help shield shareholders from personal liability and serve as a record that your company complied with all regulations regarding your business type. These are things the IRS will look for in the event of an audit. They also can demonstrate that your directors and officers conducted their jobs properly and serve as documentation for third parties, such as lenders.
Fewer internal disputes
If something needs to be reviewed or reconstructed at a later date, proper corporate books and minutes will be a lifesaver. Keeping a detailed record of your minutes and an updated corporate book can also help avoid disputes among shareholders, directors and officers.
Properly crafted resolutions serve as another way to keep internal disputes to a minimum. If a question is ever raised about a particular decision, a resolution can provide the answers. These documents also provide protection because they can be raised in a lawsuit. Resolutions can be a way for officers and directors to review past decisions when it comes to a new business development.
Meetings, minutes and resolutions are not just for big companies. Even as a single member LLC or company, documentation is still required. If a corporation or LLC is sued and unable to show it met all corporate or LLC formalities and state requirements, a judge can rule that the company has been acting more like a sole proprietorship or general partnership. This can result in “piercing the corporate veil”. Limited liability protection disappears and leaves individual owner(s) assets vulnerable if a lawsuit judgment is made against the company.
Hire it out
There are plenty of companies out there that will do your corporate resolutions and minutes for you. Most will send you a questionnaire or set up an interview on a monthly basis. They will write the resolutions for you, all you have to do is print and put in your corporate binder.
If you prefer to do them yourself, you may find this corporate minutes questionnaire template helpful.
Make it fun
Make your annual meeting an event. Hold your annual meeting at a resort or your favorite restaurant. Even though I am the sole managing member of my corporation, every year I hold my annual meeting in a special place. I take my corporate book and I call my meeting to order, I ratify all the resolutions, handle any outstanding business and then close the meeting. I’ve gotten some strange looks from the restaurant staff, but I’m in compliance!