Stop whatever you are doing right now and ask yourself this question: Do you know where your Corporate Book is right now?
Some of you may wonder where it is, and others may wonder WHAT it is? Your Corporate Book, also known as a Company Binder, is where you keep the legal records of your business. It is where you record the history of your company and document the actions taken by its directors, officers or managers.
As a business owner you are focused on Your Business: customers, service, products, cost, profits, bank account balances, just to name a few, but maybe not your Corporate Book. When you set up your company, you probably checked it off you to do list, and were happy be done with it and be able to move on to the things that make money. However, many business owners or investors leave the maintenance of this key item on the back-burner and what you are not doing on an annual basis can leave you exposed to potentially tremendous amounts of risk and liability. Questions to ask yourself today:
1) You may have two or more companies that do business with one another. Did the company buy or sell any assets to third parties or to related companies? Did you document these transactions in your company minutes? Are you having meetings to approve your companies actions, or do you just do it?
2) Throughout the year(s) you may have paid for certain personal items with your business or perhaps paid for business items from your personal account or another business account. Your company may have leased a property from you. Do you have those items documented? Are there lease agreements?
3) Have you asked yourself “What’s in your Corporate Book?”
If the answer is, “nothing much”, you may have a potential disaster on your hands. My clients in-the-know and those who consider the protection of their entities as a priority understand that it is important to document your company activities (and in some cases non-activities) in a proper, coordinated and complete manner. They rely on a professional familiar with the importance of Entity Maintenance, and how it often involves more than minutes to properly document a transaction, without leaving holes that can be attacked or challenged.
Entity Maintenance involves documentation of the business of your entity. In law, “if it is not in writing it did not happen”, can cause problems and increase pressure when things go wrong. In a lawsuit or an IRS audit, one of the first things you will be asked for is your Entity Binder, or as mentioned before, your Corporate Book. Not having it up-to-date will create cracks in the armor of the Asset Protection Entity. When you don’t have proper documentation to substantiate the business activities, you leave it up to interpretation: the interpretation of a jury or an IRS agent. The potential loss could be financially catastrophic.
To get you started…
Document your business activities, in your entity binder, but also remember to create the underlying agreements between companies and individuals. If you lease property to your business, be sure you have a lease agreement in place. If one company borrows money from another, be sure that you have a promissory note with interest charged. And of course, record these transactions in each corresponding entity. When you have a thorough set of documents, you will have a stronger shield of protection.
You can work on this yourself, or you can hire a qualified law firm to handle these documents for you. With a board-certified professional, updating your business documents is easier than you think and will keep you and your business assets or real estate investments protected as they should be. I am ready and able to assist you in coordinating your minutes and other corresponding documents to insure your business continues to provide you protection. Save yourself the hassle and be assured the job is done right, contact us here at the office and we can help get it all done for you.