Maintaining Corporate Minutes
The importance of maintaining corporate minutes is essential to both the business and the owners’ financial health. This is especially true for corporations: both S-Corporations and C-Corporations (and for LLCs that are managed by a board). Minnesota law requires that corporations keep their corporate books in order to maintain the corporate veil (which protects the owners’ personal assets from being seized to pay a business judgment).
A significant disadvantage in having a corporation (rather than an LLC not managed by a board) is the necessity of maintaining corporate minutes. Not only do you have to maintain your corporate minutes in order to maintain your corporate veil (in addition to several other requirements for maintaining a corporate veil), but the Internal Revenue Service can revoke your S-Corp tax election status if your corporate minutes have not been maintained. In a corporation, your corporate minutes have to occur for both the directors of the business and also the shareholders of the business. The shareholders approve what the directors have decided. Therefore, if you choose to change your corporate name from Roses and Thorns, Inc. to Roses are Red, Inc., you need corporate minutes from the board of directors approving the change, and separate corporate minutes approving the change from all of the corporation’s shareholders. This requirement also includes if there is only one director and one shareholder, which is common in small businesses. While it may seem odd to have a meeting with one person (i.e, the sole director and the sole shareholder), your corporation must maintain corporate minutes under the sole director/shareholder scenario.
In addition, if your corporation is only maintaining minutes for its annual meeting, which consists solely of naming the director(s) for the next year, you are not in compliance with the law. Your corporation must have minutes for every meeting – including with yourself if you are a sole director/shareholder – that involves key decisions or key company activities. For example, annual director and shareholder meetings; financial decisions such as switching banks, opening new bank accounts, taking out a loan, company credit cards, offering benefits, etc.; employee hires; compensation increases; issuance of new stock; approval of a buy-sell agreement, and any other major decision or activity.
With everything that a business owner has to do, it is tempting to be lax about maintaining corporate minutes. However, it is essential. Maintaining minutes is the foundation of your business. Make it a priority to get your corporate minutes in compliance with Minnesota law. Spangler and de Stefano, PLLP assists businesses with protecting their corporate veil, including maintaining proper minutes.
The material contained herein is for informational purposes only, and is not intended to create or constitute an attorney-client relationship between Spangler and de Stefano, PLLP and the reader. The information contained herein is not offered as legal advice and should not be construed as legal advice.