A Tale of Two Businesses
How proper maintenance methods safeguard your business from a document deficit fallout
- Business A belongs to a group of custom brokers. Prompted by a year-end reminder to update their corporate documents and records from their attorney, they complete a simple questionnaire. They respond if their company bought assets, elected new officers, lent money and a few other basic questions. Shortly after, their attorney formulates minutes in a logical order based on their answers, sends back for signature and their corporate records are complete and updated for yet another year, ready for any tax audits that might pop up.
- Business B is a trucking business. The owners, each year, and every year, do nothing about updating their records. This year, an IRS audit faces them. They learn quickly that the burden is on them, as a taxpayer, to prove that each transaction conducted by their company is legitimate through proper documentation. With the IRS now asking for three years of corporate records and none to present, Business B is scrambling to generate documents; all while trying to remember the details blurred by the quick passage of time. In this scenario, the owners of Business B risk facing tax penalties, past interest on the taxes that they did not think they needed to pay and possibly, formal accusation of fraud, if the details cannot be substantiated.
Properly maintaining corporate records helps your corporation retain its corporate status and protects its officers, directors, and shareholders from personal liabilities. This is also true for limited liability companies (LLCs) and limited partnerships (LTDs/LPs) and their owners.
Protect your corporate status
Corporations must maintain current and proper corporate records so that creditors, which include the IRS, are not able to challenge the validity of the corporate shield. The corporation must maintain corporate records of all meetings and store them in a safe place, since it is critical to maintain the corporate shield.
By maintaining corporate records, the corporation meets state reporting and filing requirements. If a corporation doesn’t maintain corporate records or is unable to annually report and file records, the corporation might face penalties, fines and get dissolved.
The importance of minutes
Corporate minute books serve as official corporate records. Keeping them up-to-date is high on the priority list. Maintaining the minute books allow people to understand the decision-making processes of the corporation. Well maintained corporate minute books are an effective means of creating a paper trail to demonstrate to the government authorities the transactions the corporation has made.
Up-to-date records allow the corporation to avoid challenges to the its authority to take certain actions.
Updating made easy
Keeping current to avoid losing your protection can be easier than you think. Failure to maintain corporate records can invalidate your protection.
The J.M. Dickerson Law Firm’s Entity Maintenance Plan can help manage these requirements and give you peace of mind that your entity is giving you the greatest protection available under the law.
The J.M. Dickerson Law Firm Entity Maintenance Plan
- One year of entity minutes
- Review of financial statements & tax returns for prep of entity minutes
- No in-office consultation needed
- Flexible payment options for entities requiring above average documentation
- Peace of mind available to current J.M. Dickerson Law Firm clients and non-clients
Annual Subscription Cost for Maintenance Plan is $100/month per entity*
*Some restrictions may apply