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Prepared By: Melissa C. Marsh, Los Angeles Business Attorney
Written: March 2009

To maintain a corporation's limited liability shield (so the owners do not become personally liable for the corporation's debts and obligations), a corporation must adhere to corporate formalities. Aside from properly forming the corporation, issuing stock, appointing directors and officers, holding annual meetings of directors and shareholders, and special meetings of the directors when necessary, the corporation should keep an organized and up-to-date corporate record book.

In addition to protecting the limited liability shield in the event the corporation, or its owners, are sued, an up to date corporate minute book can also save you in the event of an IRS audit. Your minutes and resolutions can provide justification for certain corporate deductions and loans. Without proper minutes, the IRS may reclassify some expenses and loans as income. The corporate minute book should also properly document the amounts the corporation intends to pay its officers and directors as compensation (salary, bonuses, reimbursement of business expenses), and its stockholders as dividends. A corporation should also document how much it intends to pay in rent, and should authorize the execution of any real property, or equipment, lease.

Every corporation's record book should contain:

• The corporation’s articles of incorporation, including any amendments;
  
  
• The corporation's bylaws, including any amendments and restatements;
  
  
• The resolution of the incorporator;
  
  
• The board of directors, or sole director's, first organizational director's meeting;
  
  
• The shareholder's resolution to elect S-corporation status, where applicable;
  
  
• Properly completed and up-to-date stock certificates and stock transfer ledger;
  
  
• Copies of the corporation's completed SS-4, completed 25102 notice to the Commissioner of Corporations, annual Information Statement of the Officers and Directors which must be filed with Secretary of State, and where applicable fictitious business name statements, business license, and seller's permit;
  
  
• The annual minutes, or consents, of the board of directors and shareholders; and
  
  
• The special minutes of the board of directors affirming significant corporate acts, such as the execution of a key employment contracts, lease agreements, loans, declaration of a bonus or dividend; etc..

To maintain a corporate book in properly, the corporation is required to prepare corporate minutes, or written consents, documenting the annual meetings of the shareholders and directors, as well as ratifying important transactions entered into by the corporation (special meetings). While it is preferable to prepare these minutes as the events occur, many corporations have failed to do so.

We can help you clean up your corporate minute book, and prepare the necessary minutes or consents to have the corporation's board of directors and shareholders ratify past actions. We cannot however, save or cleanup a corporation that has already received either a notice of a lawsuit, or a notice of a pending IRS Audit. At that point, it is TOO LATE.

If you would like to retain Melissa C. Marsh, a California business attorney with over 20 years experience, to clean up your corporation's record book, to prepare your annual and special minutes of the shareholders and directors, or to just answer your questions regarding the maintenance of your California corporation, please call 818-849-5206 to schedule an appointment, or Send Us An Email.

Related Services:

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• Corporate Meeting and Minute Service
• In House Cousnel Plans for the Small Business Owner

© 2009 Melissa C. Marsh. All Rights Reserved.