Courtesy of William Bronchick, Bronchick Law
Whether you’ve created a corporation or limited liability company, you must maintain records. Here’s a primer on the basic corporate records you need to maintain. At Bronchick Law we can help you set up and maintain your corporate records!
When forming a corporation or limited liability company, you are creating an entity independent of yourself. In so doing, this independent entity must take actions for itself, not you. For instance, a corporation will have a corporate bank account through which all revenues and debt payments are handled. As a shareholder, even with a single shareholder entity, you will not pay personal expenses out of the corporate bank account. This concept extends to record keeping.
For the purpose of this article, I am considering both the corporation and limited liability company documents as “corporate records.” Although the records of each entity have different names, they serve the same purpose. For instance, articles of incorporation for a corporation serve the same purpose as Articles of Organization. The following list applies to corporations, but you can apply the list to the limited liability equivalents.
Although each state has different records requirements, all require you to keep the following records.
1. Articles of Incorporation – The charter establishing the existence of the entity with the relevant Secretary of State.
2. Bylaws – The rules of the corporation. Essentially, the bylaws set out how the corporation will be administered from a procedural perspective, the rights of shareholders, how meetings will be called and so on.
3. Board Resolutions – These are resolutions passed by the Board of Directors from time to time, such as defining classes of corporate stock and approving particular courses of action for the business.
4. Minutes of Shareholder Meetings
5. Annual Meeting – Every state requires a corporation to have at least one meeting of the board of directors each year. Keep these in your corporate book.
6. Shareholder Communications – Copies of all communications to shareholders. Most states require you to hold these for three years, but you should keep these permanently to guard against future shareholder lawsuits.
7. Shareholders – A list of shareholders and the shares they own.
8. Annual Report – Most states require you to file an annual or bi-annual report with the Secretary of State. Keep copies of these in your corporate records. Most states provide a pre-printed form.
9. Balance Sheets – Shareholders have the right to inspect the finances of the corporation, although this right has limitations. You need to keep up to date balance sheets.
10. Tax Returns
So, how long should you keep these corporate records? Some attorneys will tell you three or five years. Personally, I believe you should keep them permanently. If a shareholder dispute occurs, you don’t want to testify that you threw away a document. If the business is eventually sold, the buyer is going to want to see all corporate records. Either way, you are better off holding on to all records.