As a new year begins, corporations in Houston, Galveston Island, Montrose and throughout the state of Texas need to make sure they are fulfilling all of their annual obligations. For most Texas corporations, this means submitting an annual report and paying taxes. Business licenses may also need to be renewed.
Most companies know they have to keep up on paperwork that goes to the Texas Secretary of State. However, a business law attorney in Texas knows that some companies are more lax about their internal recordkeeping. For example, your company needs to conduct an annual meeting and you need to keep minutes at that meeting. You also need to ensure that you are hosting periodic meetings of the board of directors over the course of the year when something significant happens at your business. If you do not have regular meetings and take minutes, you could jeopardize your corporate status.
Why It is Important to Keep Corporate Minutes
When you incorporate a business, you must maintain corporate formalities in order to continue enjoying the benefits of being incorporated. This means that if you formed a corporation for purposes of protecting yourself from liability or changing the way your organization is taxed, you actually have to operate as a separate corporation.
Corporations need to elect officers every year including a president, a secretary and a treasurer or CFO. An annual meeting of the board has to be held in order for these officers to be elected. If you are the only employee, only owner and only board member of your business, this may seem silly and unnecessary- but it is not. It is part of maintaining corporate formalities.
Likewise, when your corporation hires someone, makes a substantial purchase or otherwise does something major to affect budget or operations, it is also a good idea to conduct a board meeting.
At all of these meetings, you need to keep minutes so there is a record of the fact that you have followed these steps. If your company is questioned about whether you are operating as a legitimate corporation, you may need to produce these minutes in order to prove that you did what you were supposed to.
Some individuals and small privately held companies aren't always rigorous about following the rules and acting like a real corporation, and this can have serious adverse consequences. If it turns out you were not maintaining corporate formalities, the corporate veil could be pierced. You could be viewed as having created a sham corporation and not maintaining a separate corporate identity. This could result in you becoming personally liable for company debts or becoming personally liable in the event that your business has been sued. It could also lead to the IRS declaring you haven't been paying the correct taxes since you aren't a real corporation.
You don't want to take a chance and jeopardize your corporate status. Many businesses will meet with their attorney once a year for their annual board meeting and to ensure they are following all steps necessary to maintain corporate formalities. This can be advisable to protect your financial interests.
Contact a business law attorney in Texas. Call Brewer & Prichard P.C. today at 800-445-8710 or visit https://www.bplaw.com to schedule a consultation. Serving Houston, Montrose,
Galveston Island and surrounding areas.