All Business Owners Should Update Their Corporate Records Every Year
For many business owners, updating corporate records is a tedious part of the job. Most owners prefer to grow the business, focusing on sales, product development, and customer satisfaction rather than administrative formalities. However, maintaining a company’s corporate records is a must, especially if you’re trying to avoid legal troubles and issues with the IRS and creditors. Regardless of the size or type of business, all business owners should update their corporate records every year.
Proper record-keeping helps you maintain the corporate veil of protection you may need against lawsuits and creditors. If a person tries to sue the business, he or she may attempt to show that you failed to follow proper formalities according to Michigan’s law. Don’t give a plaintiff or court reason to question your compliance by keeping inadequate records.
Also, the IRS may request your corporate records. You may need to show evidence, such as meeting minutes, that your corporation approved a vital decision such as a change in the company’s fiscal year.
In addition, if you plan to sell the business, potential buyers will want to survey your corporate records to determine past performance. Incomplete records could reduce your asking price or perhaps even negate the sale entirely.
Whether your company is newly formed or has existed for years, the company is to be run by the board of directors. The decisions of the board usually reflect the election of officers, approval of stock issuances and option grants, credit arrangements, changes in authorized shares, and certain other matters that need to be documented to evidence proper authorization by the board pursuant to the company’s charter and bylaws.
The corporate records book serves as official records of the company. Keeping them up-to-date is high on the priority list. The company must ensure that the record books are also able to verify the share ownership of the corporation and should be maintained so that they exactly reflect when the shares of stock were transferred and who owns them. They must contain the original stock certificates or share register of the owners as well.
Below is a list of corporate records all business owners should update every year:
- Meeting minutes, including documentation of actions from directors and shareholders
- Annual reports
- Articles of Incorporation
- Corporate bylaws
- Contact information (names and addresses) of officers and directors
- Names and addresses of shareholders, including their class and number of shares
- Amendments filed with the state
- Renewals of Assumed Names
- Stock ledger
All business owners should update their corporate records every year. Maintaining up-to-date records will not only keep your business compliant with Michigan law, it should keep your corporate veil unscathed. Inaccurate maintenance of the company records can turn the simplest of corporate transactions into a costly experience. Well-maintained corporate record books are an effective means of creating a paper trail and protecting your company.