Holding Your Annual Business Meeting
Even if you're not required to hold an annual meeting, it's a good idea to do it before the end of the year to review various business matters--especially in these tough economic times.
Must you hold a meeting?
If your business is incorporated, then state law usually requires you to hold an annual meeting--even if you're the sole owner and sole director. If you're the only one involved, the process can be simplified by waiving notice and other requirements. Simply report the points covered in the meeting, such as approval of your compensation for the coming year. Limited liability companies may not be required to hold annual meetings (check with your state's law), but doing so is a good idea. Partnerships may also want to get partners together to discuss certain matters.
Why you should hold an annual meeting:
- To protect your personal liability protection. Conducting a meeting shows that you respect your business' entity; if you disregard your entity, creditors may be able to do so as well by "piercing the corporate (or LLC) veil."
- To protect tax moves. Certain actions must be in company minutes in order to have tax effect. For example, a C (regular) corporation on the accrual basis can nail down a charitable contribution deduction for this year by authorizing payment in the corporate minutes; the corporation then has until March 15 of the following year to make the donation.
- To take care of business. Certain actions require company approval, such as election of officers, adoption of various employee benefit plans, and authorization of loans by the company.
What to discuss
The following is a checklist of some of the actions that corporations should cover in their board meetings (similar actions can be done at meetings for LLCs and even partnerships):
- Adopting a fiscal year
- Adopting a benefits plan (e.g., accountable plan for reimbursing employee business expenses, adoption assistance plan, deferred compensation plan, cafeteria plan, educational assistance plan, group legal services plan, medical reimbursement plan, and stock option plan)
- Authorizing a reimbursement arrangement for officers' expenses
- Authorizing a sale and leaseback transaction
- Authorizing compensation and bonuses (including payments to shareholder-employees and payments to directors)
- Authorizing the purchase of the assets of another company or the sale of your company
- Authorizing transactions between the corporation and a shareholder (such as leasing property owned by the shareholder to the corporation) and interest-free or below market loans between the corporation and shareholder)
- Declaring dividends
- Making or terminating an S corporation election
- Retaining earnings
Resource
Consider using BizComply from BizFilings, a compliance management tool with a dashboard that alerts you to must-take actions at a glance. Cost: $50/year (free to customers using BizFilings Registered Agent services).
Barbara Weltman, author of several books including her most recent, 1001 Deductions & Tax Breaks 2009
www.barbaraweltman.com
Copyright 2008. All Rights Reserved.
