Why Corporate Housekeeping is CrucialBy Nina Kaufman, Esq.
Lest my previous post be construed as just a plug to pay lawyer fees for no reason, here’s the primary reason that kind of corporate housekeeping is so important:
You risk exposing your personal assets to creditors if you don’t do them.
What? Wasn’t protecting your personal assets the whole point of forming an LLC or corporation? Yes, but formation is only one part of it. There’s maintenance as well. Legally, most states have laws providing that the owners and managers of a business (e.g., the shareholders and directors if a corporation and the members if an LLC) have an annual meeting. At the annual meeting, you are supposed to choose who will run the company for the following year. Even if you’re a solopreneur and hold all the posts, you’re supposed to have a meeting to confirm the decision. If you don’t, you are technically in violation of the law and have just given your creditors a basis for ignoring the limited liability shield you spent good money to establish.
For other reasons why it’s good business practice to prepare minutes at least annually, check out my article, “The Simple But Powerful Reasons for Corporate Minutes,” on my Wise Counsel Press site.
One last tidbit to explain why minutes are good: Potential purchasers of your business look for them as part of their due duiligence. If you’ve gone without them for a number of years, the sloppy record keeping may dissuade the purchasers altogether or reduce the price you could get for your company.