Why Do I Need to Hold an Annual Meeting for My Business?

We think nothing of visiting the dentist every six months, and meeting with our doctor for an annual checkup. Likewise, most of us regularly maintain our automobiles. Annual maintenance of your business is every bit, if not more, essential since your business drives your income and livelihood.

Company Benefits

An annual meeting provides an appropriate platform to review company progress and conduct company business in an orderly fashion. It’s a short mini-business retreat for you and your trusted business advisors, a chance to step back, and see your business from a birds-eye view.

Typical agenda items at a Corporate or LLC annual meeting include:

  • Documenting owner loans and salaries;
  • Appointment of officers and directors;
  • Approval of contracts and purchases;
  • Review of employment matters and issues;
  • Appointment or introduction of new team members;
  • Review or modification of company ownership;
  • Business succession planning;
  • Review of changes in the law effecting the business and its owners;
  • Tax planning;
  • Trouble-shooting actual or potential legal issues that have arisen; and
  • Discussion of company goals and objectives for the coming year.

Legal and Tax Benefits

If your business is ever the subject of a tax audit, you may have to prove that your company has a legitimate profit motive, particularly if you have suffered consecutive years of losses. Having a record of annual meetings helps demonstrate your business was formed and operates with a true business purpose.

Additionally, most tax auditors immediately ask to review your business Minute Book to see if your annual meeting minutes support and properly document the business deductions and expenses claimed by the company on its tax returns.

Similarly, if your company is involved in a lawsuit, the minutes of your annual meetings help defend you and your company against claims that it was managed irresponsibly or even illegally.

Through a process known as "piercing the corporate veil," you may be personally liable for your company’s debts if a court decides that you were not following legal formalities or if you were using business assets for personal use. Recording the details of your company's operations and activities in an annual meeting will help support your case that you ran the business professionally and responsibly.

In short, the best defense is a good offense. For business owners, this means conducting and holding annual meetings and documenting your business activities with minutes prepared, signed and safely filed in your company’s Minute Book. Follow this conventional wisdom, and you’ll improve your business security.

For more information contact Business Law attorney, Brian J. Plachta, at (616) 458-3994 or email bplachta@pmalawpc.com.

Categories: Business Law

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