[Time to Read: 2.5 mins] As we’ve just ended the year, it is always important to remember to do proper annual minutes for your various business organizations.
Many corporations, limited liability companies, partnerships, and other business entities get tied up in other year-end business and ignore what is often perceived as minutia in the recording of annual minutes and year- end operational meetings. Others just forget to do them. Small businesses are particularly susceptible to ignoring this very important corporate obligation and tool.
If done properly, annual minutes or year-end minutes, provide a structure which can benefit the corporation, partnership, limited liability company, or business entity in various ways.
Year-end minutes can be used to:
- Ratify and grant authority to various officers, members, managers, partners, or other individuals, to handle certain types of arrangements and agreements for the following year.
- Ratify any transactions that took place during the past year.
It is crucial to do this. Without year-end minutes, in any dispute between owners or an outside creditor with an interest in the corporation, partnership, limited liability company, or other business entity’s assets, an argument could be made to set aside and attack certain transactions on the basis that they were not properly authorized and the parties involved lacked authority. While much of this is fact specific, simple resolutions can assist in preventing any such arguments.
Additionally, failure to do minutes of any kind could be used in an attempt to pierce the corporate veil or as a part of an alter ego claim for failure to follow corporate procedures.
As such, it is extremely important to produce annual minutes, even if the minutes are as simple as a 5-minute meeting between two partners or an individual sitting down and going over the authority and transactions of the corporation. Even these forms of simplified minutes can be used to bolster any corporate LLC and partnership structure or any transaction, thereby avoiding or preventing potentially greater headaches down the line. Have you done your year-end minutes yet? If not, why not?