Don’t Underestimate the Impact of Corporate Minutes

An often overlooked corporate requirement is the maintenance of corporate minutes. Properly prepared and documented minutes can assist your attorney, CPA and advisors in defending corporate actions in the following areas:

• Reasonable shareholder/officer compensation

• Bonus payments, fringe benefits, and deferred compensation plans

• Rent and lease agreements

• Approval of S–Corp distributions and C-Corp dividends

• Identify officers and directors

• Purchase of additional or replacement of property and equipment

• Stock transactions

• Approvals of financing arrangements, loans, and contracts

• Approval of transactions with shareholders

• Significant financial, tax, and legal decisions

Businesses are incorporated to protect shareholders’ personal assets from business risk and shield owners from personal liabilities. Current, complete, and accurate corporate minutes can provide the documentation that may be the difference between a favorable shareholder settlement and a costly court or audit action. During an Internal Revenue Service audit, the agents will review corporate minutes to locate the corporate resolutions accepted by the shareholders and/or directors to be certain the authority is present for corporate actions. Without proper documentation, the IRS may disallow certain expenses and reclassify the disbursements that could result in higher taxes or even double taxation.

Favorable resolutions to disputes are not guaranteed with comprehensive corporate minutes, but they will provide substantial support for the corporate positions.