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- Where can you get instruction on procedures to upkeep corporate books? Any office supply store will have books or cd’s on recordkeeping.
- If you realize you are out of compliance with the record keeping requirements; what is the proper procedure to get in compliance before a law suit? You will need to go back and reconstruct all meeting minutes you have missed, and you will need to document all the major decisions. This is critical to protecting your corporate veil..
- I’d like to better understand the requirements of keeping actual paper records vs. electronic copies for Corp records? All state statutes require records for the corporation or LLC’s to be kept in written form and signed by the appropriate party inside the record book. These rules are also found in your companies Bylaws and Operating Agreement.
- As a C-Corporation how can the corporation pay for the President’s health insurance and not offer the same benefit to employees? The general rule is that a company may not discriminate in the awarding of fringe benefits. However, the eligibility criteria for fringe benefits may not allow certain employees to be eligible. For example, a part time employee or an employee under 25 could be excluded. Also an employee who has only been with the company a short time who has not met the eligibility requirement could be excluded.
- Are LLC’s required to have & document Member meetings and Manager meetings? State record-keeping requirements vary, however as a matter of best practices you should hold meetings and keep documentation in a record book along with the Articles of Organization and Operating Agreement. Look to your Operating Agreement for the meeting requirements for your specific company.
- Can distributions/dividends be defined on a limit (up to) at the beginning of the year? (same with loan repayments to shareholders) Yes. However, make sure this is properly documented and approved by the Shareholders and the Board of Directors.
- Is there a state agency that will assist you in knowing the corporate laws? Can they? Though state agencies have information on their websites, they will direct you to hire a professional since they are not allowed to give legal advice. For a specific state agency that governs corporate law you should look to the Secretary of States website.
- One CPA told me I need to elect S’ Corp status no later than when I file my first Corp Fed Tax return. Another said it’s supposed to be filed earlier. Which is it? You should file for S’ election no later than 2 months & 15 days of the date of Incorporation for the election to be effective your first year in business. If you miss this deadline, you will need to file form 2553 as an attachment to form 1120s when filing your annual taxes with a statement of reason for late filing.
- We’ve been in business for 1 1/2, do we start record keeping now or try to reconstruct? You will need to go back and reconstruct all meeting minutes you have missed and document all the major decisions. Better to reconstruct than to form a new company.
- How often does the board of directors meet? You need to have a board of directors meeting at least annually and any additional meetings as needed to document any major or extraordinary decisions the board needs to make on behalf of the corporation.
- I have a C’ Corp, I want to suspend my wages to prevent going in the red. What is the best procedure? Resolution? IRS issues? The rule here is that an owner operator must pay themselves a “reasonable compensation” for their efforts. But if the company is not making enough money to pay its bills you are not required to force your company into bankruptcy through wages. But if you do continue to take money out of the company through dividends, then the reasonable compensation rules would apply. This discussion should be with your CPA to discuss the appropriate ratio for you and your business.
- When you do a resolution and there are two people on the Board, does this mean a formal meeting (attendance, notice, etc.)? If there are multiple directors for the company, then each director has a right to vote. The notification can be formal or informal. The key here is that you need to document what you did and how the meeting was conducted.
- If I take a business trip (for the Corp) is it sufficient to submit an expense claim & have it approved? Yes, but you should make sure to keep all receipts for business travel and attach them to the report for reimbursement.
- A Corporation must have a director? BOD is not enough? If you have a single director or multiple directors, that will constitute your board. You cannot have a board of directors unless you have a director.
- Is documentation necessary to document loans to company and gifts/bonus to employees? Yes. This is called a resolution. If it is a loan then there is a resolution to loan or borrow. This resolution should also accompany a promissory note.
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