So you’ve incorporated and finished your corporate book and started your business, so you’re done with the paperwork right? Wrong! With every Corporation, S Corp, LLC, Series LLC or Non Profit comes annual paperwork and resolutions throughout the year. It’s a necessary part of doing business. It can seem like a burden, but when you think of the benefits you receive, liability protection and tax advantages, it’s well worth it to make sure it’s done.
Annual Minutes. So let’s start with the basics, every year around the anniversary of your incorporation date you must prepare and sign annual minutes. Annual minutes can take two forms, consents or meeting minutes. You will need these for the Shareholders and for the Directors (or Members and Managers if you’re an LLC). The Shareholders must elect the Directors and approve actions taken throughout the year. The Directors must elect the officers. These minutes can be simple or a bit more complex depending on your business situation such as how many owners you have, are you re-electing the same directors and officers etc.
Resolutions. There are also various Board resolutions that must be done throughout the year. For instance, most businesses open bank accounts. Do you have a resolution documenting the Director’s approval for this? Did you open a merchant account, did you sign a lease, did you hire an accountant or lawyer, did you borrow money or purchase a large asset. All of these decisions, and more, must be documented properly.
Why Do Them? So why do we need to be sure the documents are in order? First, you are required to by law. This is the trade off you agreed to when you signed up for liability protection. Second, if you are ever sued, and face it, in today’s litigious society it’s quite possible, one of the first things that are asked for is for your corporate minutes. The reason this is done is if they are not available, can’t be produced or are faulty, you corporate liability protection can be wiped away and you stand to have personal liability with your personal assets at risk.
So the lesson is, do your minutes and resolutions and be sure your paperwork is in order and up to date throughout the life of your business. Don’t get sued and then try to recreate years of paperwork. It is illegal to backdate documents and you may need to testify as to when they were created under oath.
AMC Legal can help you at any stage of your business. If you’re new, be sure you have the appropriate corporate book. You can view our corporate kits here. We can prepare resolutions and prepare your annual minutes for both Shareholders and Directors. If you are an established business and have not documented your actions please call me at 630-590-3640 to discuss bringing your corporate paperwork up to date. It’s better to do it late, than not at all. We can get you up to date and keep you that way in the future.
Annual Reports
What Is It? Each and every year in Illinois, your Corporation, S Corp, LLC or Non Profit is required to file an annual report with the Illinois Secretary of State on the first day of your anniversary month. It is imperative that this is filed on time (or even early) so that your corporate status is always in good standing. If you are late, the secretary of state will put your business status at “not good standing.” This means you are not following your legal obligations to pay your franchise tax and file your report. If you are in this status your liability protection for that period of time is questionable. There have been cases where being in “not good standing” has made a potential personal liability claim against a business owner. You do not want to be in that situation.
