Hold Regular Meetings

#6 in Lee’s formalities checklist asks “Are you holding your annual meetings?”

#7 asks “Have you given proper notice (and kept copies) of the Meeting of the Managers?”

#8 follows up with “Have you kept proper and adequate minutes for the annual Meeting of the Managers?”

Whether or not you are the only owner, you should hold meetings for your company. Any real company will send out notice of its annual meeting, actually hold it, and have minutes taken to document it.  Holding the meetings and following all the formalities is essential to show a court that you were treating your company like a company and not just your alter ego.

One of the sections in your operating agreement should be a description of how often your company will hold meetings and the procedures necessary to conduct the meeting.  It should state:

• how long before the meeting notice should be given
• how notice of the meeting will be served
• who should attend the meeting
• what percentage of attendees are required to constitute a quorum able to vote on company business
• what happens if a quorum doesn’t show up to the meeting (There are three owners and only one shows.  Should that one be allowed to make decisions that will affect the whole company?)

At a minimum, you should hold an annual meeting to go over what has happened over the past year and then plan for the next year.  Depending on the needs of your company, you could mandate quarterly, monthly, or even weekly meetings of the owners and/or managers.  All of this should be written down in your operating agreement or bylaws.

Once your basic company-wide meetings are spelled out in the operating agreement (or bylaws, if you are a corporation), make sure you play by the rules and hold those meetings as proscribed. Document that you notice them ahead of time (or have attendees fill out a waiver of notice beforehand). Hold the meeting–you can even use it as an excuse to have a good dinner and write off at least part of the expense as a business expense.  Discuss company business, and take minutes that the secretary/manager of the company signs and then files in the corporate/LLC minute book.

Taking minutes is an art form.

The first time I took minutes in a corporate meeting, I sent them off to an old attorney friend for approval. The guy chewed me out, saying I had done them all wrong and exposed the C corporation to big liabilities. Taking minutes is not hard.  The problem is, you can’t afford to pay the lawyer to do it for you, and nobody ever teaches you how to do it. But it’s so important to do it right.

Remember, your minutes are basically public information.  No, they aren’t officially filed anywhere with the government, but if there is ever a lawsuit or problem, one of the first things the opposing counsel will ask for is your minutes.

The opposing counsel will first want to make sure you are following the rules outlined in your operating agreement or bylaws.  If you don’t follow the rules, obviously you didn’t treat the company as a real company, so the courts won’t have to treat it as a real company either.

The opposing counsel will next be looking for damning information in your minutes. So what you write down is very important. (I go through how to write minutes appropriately in detail in my LLC Advanced and LLC Wizard packages.)

Both LLC and corporate entities require maintenance, including the requirement that you hold company and corporate meetings and keep minutes. All business resolutions need to be documented. Elections of officers, the appointment of managers, and all of the other management issues in your company should be addressed in your operating agreement or bylaws.  One of the ways you show the courts that you have treated the company properly is by keeping good minutes.

Your company may be “all in the family,” and it may seem like a hassle to formally call a meeting and hold it.  But if you want the courts to treat the company as a separate entity instead of your alter ego, then you had better treat it as a separate entity.  Otherwise, the courts will pierce your corporate veil protection and you will become personally liable for your company’s issues.