This month, we feature articles discussing the importance for corporations to keep a record of all of their meetings and decision making processes, more on paid sick leave, and reasons why an S Corp should keep meeting minutes even if they’re not required by law to do so.
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The Importance of Incorporating Minutes
Forming a corporation is an important and sometimes exhausting, ask. Typically, after the new entity is established and the initial shares sold to stockholders, the owners take a deep breath and get back to doing what they do best — running the day-to-day business operations. Unfortunately, as a result, the owners often put off dealing with many tasks necessary to running their new corporate entity.
Ignoring the care and feeding of your corporate legal entity is foolhardy. That’s because failure to properly document and support important tax decisions and elections can result in a loss of crucial tax benefits. Even worse, the fact that you have ignored your own corporate existence may result in its being similarly disregarded by the courts, with the risk that you may be held personally liable for corporate debts. And, of course, as time passes and memories fade, if there is no written record of important decisions, directors or shareholders may forget who agreed to what and under what circumstances. This can lead to controversy and dissension, even in the ranks of a closely held corporation.
Fortunately, the regular structured use of written minutes and resolutions, which record all important corporate decisions and the votes taken to approve them, helps greatly to defuse all of these problems. Quite simply, your first and best line of defense against losing the protection of your corporate status while helping to ensure continued harmony among your directors and shareholders is to document important corporate decisions by preparing and maintaining adequate corporate records.
Meeting minutes serve as the official record of corporate activities. They document the major votes, resolutions, and transactions that affect the company along with:
- Elections of new officers or directors
- Issuance of stock
- Compensation increases
- Approvals for items like a long-term lease, group health plan or other decisions that impacts the company
- Approval for a financial decision like a business loan, sale of assets, election of an S corporation tax status or acquisition of another business
- Annual director and shareholder meetings
Essentially, minutes should serve as your company’s institutional memory. As with any kind of documentation activity, it’s best to record the minutes right after the meeting, while all the details are still fresh. Typical minutes include basics like:
- Date, time and location
- Roll call (who was in attendance, who was absent)
- Agenda items and whether they were addressed
- Voting actions (document how each individual voted and who abstained)
You don’t need to file minutes with the state. Instead, they should be kept with your other corporate records for at least seven years. Shareholders, officers and directors are entitled to review meeting minutes upon “reasonable request.”
Stick to a basic format for your corporate minutes (find templates online) and you’ll be more likely to make record-keeping just another regular business process.
A record need take only a few moments to complete. Good records will help keep your company compliant with state law and keep your corporate veil intact.
Arizona law requires all employers, whether or not they have been determined liable to pay unemployment taxes, to keep the following records for the most recent four calendar years. When any change in your business occurs, it is your responsibility to notify the department promptly. A delay could result in additional costs to you later. Arizona law requires that you post in your place of business a Notice to Employees (POU-003) or Avios a Los Empleados (POU-003S) that provides information about the Unemployment Insurance program to your employees.
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The Fair Wages and Healthy Families Act was passed through a ballot initiative that voters approved in November 2016. In addition to paid sick leave, the measure provides for incremental state minimum-wage increases through 2020. In the first few months after the law was approved, the Industrial Commission of Arizona (ICA)—the agency tasked with enforcing the paid-sick-leave law—provided little guidance for employers, said Steve Biddle, an attorney with Littler in Phoenix.
“The initial set of regulations were very short and not very insightful,” according to Nonnie Shivers, an attorney with Ogletree Deakins in Phoenix. However, the ICA has since been very responsive to employer questions and has provided useful, more robust guidance over the past few months, she said.
Though supplemental regulations have yet to be finalized, the ICA has issued answers to frequently asked questions to aid employers that have questions about complying with the new paid-sick-leave law.
Biddle noted that the FAQs are detailed and have been updated several times based on input the ICA received from the business community.
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Meeting minutes are an official record of what was accomplished at a particular meeting. Unlike a tape recording, which reflects what was said at a meeting, minutes are meant to record only things that were done at a meeting. If you run an S corporation, you are not required by law to keep meeting minutes. However, they can be a good way to record the progress your company makes toward meeting corporate objectives. Minutes can also be useful as a legal record of corporate activities in the event of a lawsuit or tax audit.
1. Get a copy of the meeting agenda in advance. Having the agenda in advance allows you to understand the flow and structure of the meeting and puts you in a better position to take accurate notes.
2. Write down the administrative facts of the meeting. As an introduction to the actual minutes of the meeting, standard parliamentary procedure requires the notation of certain facts about the meeting. Include the name of the organization, the meeting time and place and whether the meeting was regular or special. The minutes should also include the names of those present, particularly the chairman and keeper of the minutes. For an S corporation, it is possible that the chairman and keeper of the minutes are one and the same, since S corporations are typically not very large.
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If you have stepped into the Pay Tech lobby in the past five months, you may have already met our friendly receptionist, Linda Jaacks. She joined our team as the Director of First Impressions in March.
Linda and Stan are still newlyweds, they are celebrating their 47th wedding anniversary this month. They have a daughter, Michelle. Michelle lives in Scottsdale with her husband and Linda’s two grandchildren (Jacob and Emma). She also has two grand dogs. They are Jenny, a Wheaten Terrier, and Coco, a Shih Tzu.
Linda’s hobbies include watching Noir movies and reading mystery and crime novels. Her favorite hobby, though, is spending time with her grandchildren.
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