Why should you keep good corporate records?
Understanding the role of corporate records is important to understand why you should keep good corporate minutes. Keeping good corporate records helps you maintain the “corporate veil protection” you need against lawsuits and creditors. If you are not keeping good corporate records, if someone sues your business, he may try to pierce your corporate veil and show that the business failed to follow proper corporate formalities. If he can prove this, he may be able to go after your personal assets in addition to business assets. One of the benefits of forming a corporation or LLC is to maintain the shield of limited liability. In order to safeguard that limited liability, you need to keep the proper corporate records.
Different government agencies may need your business’s corporate minutes for various things. For example, the Internal Revenue Service may request your minutes to show that your business approved an important decision. Additionally, if you ever wish to sell your business in the future, potential buyers will likely want to examine your records in order to determine the business’s past performance.
What records you should keep track of
State rules for record-keeping vary. In Pennsylvania, corporations must keep the following records at the principal office in Pennsylvania or the registered office:
- Complete and accurate books and records of account.
- Minutes of the proceedings of the incorporators, shareholders, and directors.
- A share register giving the names and addresses of all shareholders and the number and class of shares held by each.
While LLCs have less state requirements, Pennsylvania requires you to keep the following records:
- Formation and Organization documents (Certificate of Organization and all written Company Agreements).
- Correspondence with the State (any document filed with the State concerning the LLC and any document received from the State concerning the LLC).
- Financial documents (a copy of all federal, state and local income tax returns for each year and any financial statements from the last three years).
- Documents related to the internal operation of the LLC.
- Records of Members and Managers.
Keeping proper meeting minutes
Corporations are required to keep meeting minutes, whereas LLCs do not need to keep them unless the task has been included in the operating agreement. Minutes serve as the official record of all corporate activities. However, they do not need to include every detail and can be in simple language. Typically, meeting minutes include the date, time, and location of the meeting; who attended the meeting; agenda items and whether they were addresses; and voting actions (if there were any). Meeting minutes do not need to be filed with the state. But, should be kept with the other corporate records for at least seven years.