Document important business decisions. Good records significantly increase a business’s credibility with third parties, such as potential purchasers, investors, or lenders. Your company’s annual meeting minutes are an essential part of recording business decisions. Oftentimes, documenting decisions can be handled by a written consent signed by the business owners rather than holding an actual meeting.
Here are some items to watch for:
- Signatures. Be sure you have signed originals of important documents. Sometimes documents do not get signed, so it is important to double check before it is too late.
- Termination dates. Track when your agreements end, particularly leases and employment contracts, so you can develop planning options.
- Remove liens. If your business has paid off outstanding obligations which have been secured by liens, follow up on having these liens removed.
- Trademarks. If you have trademarked your business name and/or logo, be sure you are tracking the deadlines for subsequent filings which are required in order to maintain your trademark registration (generally 5 and 10 years after the initial filing, an every 10 years thereafter).
- Business Valuation and Insurance. Review the value of your business and determine the amount of coverage needed for key man insurance policies or life insurance policies tied to Buy Sell Agreements.
- Minutes. Annual meetings are an excellent opportunity for owners, shareholders, directors and officers to update all parties on the entity’s current and past activities, address outstanding issues, and discuss future plans for the business.
Corporations are legally required to hold annual shareholders and directors meetings.
Although there is not a similar requirement for LLCs, it is a good practice to have annual meetings. These are strong evidence that the formalities of the LLC have been maintained. Minutes may also be highly relevant if a dispute arises among LLC members.
Preserving limited liability status.
LLCs and corporations are generally regarded as separate legal entities, shielding owners, stockholders, directors and officers from the debts of these businesses. However, there are circumstances when these entities are disregarded and the business owner is held personally liable for the business’s obligations. It is important to take steps to demonstrate that your business is making decisions separate from you in your individual capacity. Documenting these decisions with written minutes helps establish the separate existence of the entity.
Impact on Sales Price.
You are more likely to get a better price for your business when you decide to sell if you have clear written documentation of significant business transactions and decisions.
Annual minutes should review and ratify actions taken during the prior year. Major decisions which should be documented include:
- Agreements and contracts
- Loans to or from the business
- Large purchases for property and/or equipment
- Insurance purchases, such as life insurance, disability insurance, medical insurance, liability insurance
- Leases for office and/or equipment
- Sales of real estate
- Adding or removing owners and employees
- Other financial matters such as salaries, bonuses, profit sharing arrangements, retirement plans
- Any unusual events not in the ordinary course of business
For more information on these or other business legal matters, please contact Kathy Tremmel at Tremmel Law, PLLC at (512) 539-0317 or email@example.com.