Blog | Entrepreneurship

Corporate Paperwork

Protect your business (and your assets) with the proper corporate paperwork

Summary

• Legal expert and Rich Dad advisor, Garrett Sutton, shares why proper corporate paperwork is the key to protecting your business and assets

• Your company minute book should contain all the corporate paperwork in one place

• Be sure to consult with the right people when assembling your company minute book

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Having the proper corporate paperwork for your LLC or LP is important. A failure to have it in place can lead to piercing of the corporate veil and the imposition of unlimited personal liability. Piercing the corporate veil is when someone gets a judgment against the company (ie: wins a lawsuit) and argues because you, the company’s owner, didn’t follow the corporate formalities they should be allowed to collect from you personally. You do not want this to happen.

Establish the company minute book

The company minute book is used for one simple reason. By forcing yourself to keep all the company documents in one place, in one binder, you are much better able to keep your records current. If one document is missing, if, for example, your annual meeting minutes for the last year didn’t get prepared, you will be readily able to determine that fact and immediately correct it. Your minute book keeps you focused.

If you do not have a minute book you can very easily create your own. Obtain a three ring binder from any office supply store along with some dividers, and include the following:

Corporations

• Articles of Incorporation

• Corporate Charter from the Secretary of State

• Resident Agent form filed with the State

• SS-4 notice with Employer Identification Number assigned by the IRS

• Bylaws

• Minutes of Meetings (Organizational, Annual and Special, plus waivers and notices)

• Share Certificates (originals or copies)

• Share Register

• Form 2553 (if you filed for S corporation taxation)

Limited Liability Companies

• Articles of Incorporation

• Certificate of Organization from the Secretary of State

• Resident Agent Form filed with the State

• SS-4 notice with Employer Identification Number assigned by the IRS

• Operating Agreement

• Minutes of Meetings (Organizational, Annual and Special, plus waivers and notices)

• Membership Certificates (originals or copies)

• Membership Register

• Form 8832 if you filed for a corporation tax election

Limited Partnerships

• Certificate of Limited Partnership (LP-1)

• Certificate of Formation from the Secretary of State

• Resident Agent form filed with the State

• SS-4 notice with Employer Identification Number assigned by the IRS

• Limited Partnership Agreement

• Minutes of Meetings (Organizational, Annual and Special, plus waivers and notices)

• Limited Partnership Certificates (originals or copies)

• Limited Partnership Register

Please note that some of the documents listed above may be known by different names in various states. The important task is to make sure you have one of each type of form in your company minute book to maintain your protection.

 

In your corporate paperwork, you should have a well established document retention policy.

Typically, a document retention policy is developed by the company’s senior management, with input from all the employees in the business.

The purpose of this policy is to determine how you will preserve and destroy information. Streamlining this will help you save time when seeking necessary information and will also help if documents are requested should litigation (be it a government or business dispute) come into play.

The employees, being on the front lines and dealing with accumulating masses of data, should always be consulted. As well, the company attorney, who should know the legal retention time periods for your specific business, and your IT professional will also be involved.

The issues to consider include:

• What documents are involved?

• Where are these documents?

• How are they stored?

• Who has control over them?

• How long should the documents be kept?

• Who will decide which documents are kept or destroyed?

• How will the documents be destroyed?

• Who is in charge of enforcing the policy?

As the records pile up, a document retention policy will help you to keep control over a mass of information.

Document destruction policy

As part of your document retention policy, you will set forth an automatic email destruction date. For example, your policy could state that after four years all emails not pulled aside for relative retention reasons will be destroyed. You really don’t need to keep all the thousands and thousands of emails from four years ago related to solicitations, clarifications, confirmations, directions and meetings for beer. It is costing you to keep it. So get rid of it.

The policy should be understood and followed by all employees, and employees who don’t follow it should be disciplined. Yes, it is that important. The policy should be periodically audited for compliance and reviewed for legal and technology updates.

As a note, your document retention policy should also deal with “The Litigation Hold.” When litigation is ‘reasonably foreseeable’ you have to put the brakes on any document destruction. As a party to a lawsuit you have a duty to preserve evidence. The policy should set forth who is in charge of declaring a litigation hold, and what to do when one is in place.

The question then becomes: when is litigation reasonably foreseeable? Well, service of lawsuit certainly qualifies. At that point you’ve been sued. But a demand letter or a legitimate verbal threat of litigation is also considered a reasonably foreseeable event. As is any initial investigation by any governmental or law enforcement agency. An incident or accident involving a property or personal injury also qualifies. In such situations, or in similar matters, it is best to consult with your attorney.

Keep your corporate paperwork up-to-date

The key element for the future will be maintaining your company minute book. This will be primarily a function of adding your annual and any special meeting minutes to the minute book.

Remember, all states require that at least one corporate meeting per year be held. That meeting needs to be put in writing (the minutes) and placed into the meeting book to prove that the corporate formalities have been followed. And while not all states require annual meetings for LLCs and LPs, the day is coming when a failure to hold such meetings will result in a piercing of the limited liability veil. So you are best advised to hold LLC and LP meetings as well. And, of course, you will reduce these meetings to writing and put the resultant minutes into the LLC or LP minute book.

As well, government record retention rules require that your articles, bylaws and minutes be kept permanently. As in, forever. Shouldn’t you keep these important documents in a safe place for the long haul? The answer is yes.

Following these formalities, you can achieve corporate protection and avoid a piercing of the corporate veil.