There are a number of benefits of structuring your business as an S corporation—the tax planning options, the potential to write off business expenses, the status of the S corporation as a separate, independent entity—but with those benefits there are also certain administrative requirements which must be met, including keeping minutes.
State Requirements for Keeping Meeting Minutes
S corporations, which are first formed as C corporations and then elect the Subchapter S designation from the IRS, are subject to state laws that govern corporations. Most states require that corporations hold regular shareholder meetings and keep minutes of such meetings. While S corporation meeting minutes are not required to be filed with the state, you should keep copies of meeting minutes with your corporate books and records.
Practical Reasons for Keeping Meeting Minutes
Even if your S corporation is registered in one of the few states which do not require that meeting minutes be kept, it’s still a good idea to keep meeting minutes.
While the federal government has no requirement regarding the keeping of meeting minutes if the IRS is planning an audit of your company they may ask to examine your company’s meeting minutes.
Minutes of meetings also provide a detailed record of corporate actions and can therefore be helpful in the event your corporation becomes involved in a lawsuit.
What are Meeting Minutes?
The minutes of a meeting are a record of the decisions made at a meeting, the actions are taken, and the outcome of votes. It’s also important to record who was present at the meeting; if a vote is taken during the meeting, and either your corporate bylaws or your state laws require a quorum—that is, a minimum number of people attending the meeting—your minutes will be able to show that the quorum, if any, was met.
How to Write Meeting Minutes
Meeting minutes must either be in writing or in a form that can be converted to print—for example, in a Word document. You can use whatever meeting minutes format is most appropriate for your company meetings, but it’s probably a good idea to consistently use the same format.
As for content, in general, your S corporation’s meeting minutes should contain the following information:
- date and place of the meeting
- who was present and who was absent from the meeting
- details about the matters discussed at the meeting
- results of votes taken, if any.
Requests to Review Minutes
All members of an S corporation—that is, the shareholders, directors, and officers—are entitled to request a copy of the meeting minutes taken at any meeting. Such requests should not be taken lightly. Legal action can be taken to compel the provision of such minutes if a valid request to review the minutes is denied.
Written Consent to Action
Depending on your state’s laws, your corporation may be able to take action on a matter without having to hold a meeting. In states where this is permitted, you will have to obtain the written consent of the minimum number of shareholders required to approve an action if a meeting had taken place. The written consents obtained in such cases need to be kept with your corporate minutes, as they are treated as minutes themselves.
For smaller S corporations, in particular, written consent can be an attractive option because once the consents are obtained, the corporation can take action on a matter without having to hold a meeting.
Failure to Keep Meeting Minutes
Having to keep meeting minutes may seem like a trivial thing, particularly for smaller S corporations, but failure to keep meeting minutes as governed by your state’s laws can attract serious consequences. The most severe consequence is the loss of liability protection. If this happens, shareholders’ personal assets may be exposed to liability for the corporation’s debts.