Structuring your business as an S Corporation has its benefits but it also comes with its own set of compliance regulations. For example, there are certain S Corp board meeting requirements that you must meet to remain in good standing. So when you’re thinking about going with this type of business entity, it’s important to first figure out whether you’re fine with the additional compliance requirements.
Calling a meeting of the board is one such requirement that S Corps need to fulfill. In this guide, we’ll discuss what S Corp board meetings are, who’s required to attend them, the format to be followed, etc. This will put you on the right path to ensuring compliance.
Understanding the Requirements for Holding an S Corp Board Meeting
S Corps have some of the same compliance formalities as typical C corporations and this includes an annual board meeting and shareholder meeting. These meetings must be held once every year but additional meetings can be called for specific issues or urgent decisions. You must record the minutes of these meetings as well.
One major difference between an S Corp vs. LLC is that these corporations have a board of directors who look after corporate affairs. Directors also elect officers who run the business. Meanwhile, an LLC is more like a partnership where the members manage the business themselves.
A major purpose of the annual meeting is to elect the board of directors who can then handle the corporate affairs for the coming year. The other topics that can be covered in the annual meeting include adopting bylaws, voting on new business proposals, issuing stock, discussing a potential sale or merger, etc. A special meeting can also be called at any point throughout the year to consider these and other issues as they arise.
Who Are Required to Attend S Corp Board Meetings?
The number of directors that must be present at a board meeting is not set in stone. There are no specific requirements regarding this, however, votes taken at the meeting will only be valid if there’s a quorum. Quorum is an essential part of the S Corp board meeting requirements that must be met.
Having a proper quorum in an S Corp board meeting means that more than 50% of the directors should be in attendance for the meeting to be considered valid. This is to ensure that a minority of the directors isn’t able to control the corporate affairs without check and balance. This is the typical limitation for S corps but it’s possible to opt for a higher or lower quorum requirement in the corporation’s bylaws, as long as it meets any absolute minimum requirements imposed by the state.
It’s generally not possible for shareholders to attend an S Corp board meeting as the directors are the primary attendees. However, corporations can include provisions in their bylaws that allow shareholders to attend the meetings. It’s also possible for the board to allow certain shareholders to participate in the meetings should they find it necessary.
What Is the Format for S Corp Board Meetings?
There’s no defined format that must be followed for an S Corp board meeting. It’s up to the organization to decide how it wants to conduct those meetings. However, it’s recommended to create a framework that should be followed at every meeting so that the proceedings run smoothly.
For example, distributing a set agenda before the meeting ensures that the participants come prepared to talk about the topics up for discussion. It ensures that all the necessary topics are covered while also providing flexibility for additional topics to come up during the meeting.
There’s no compulsion to hold in-person meetings, either. That’s not one of the S Corp board meeting requirements that you must follow. It’s up to the organization to decide whether meetings will be in-person or online. The only thing that matters is that all the participants can hear the audio and communicate with each other clearly. These meetings can be scheduled during or outside regular working hours.
The board meeting doesn’t have to run for a specific period of time. Its duration will depend on the agenda. If there’s not much to discuss, it can be over in a few minutes, or go on for hours if the agenda has items that require thorough discussions. Typically, most board meetings will last for a couple of hours.
How to Record Minutes for S Corp Board Meetings?
An S Corp initially starts as a C corporation before it elects the IRS Subchapter S designation, meaning that it has many of the same compliance requirements as the latter. Keeping minutes of the meetings is part of the required corporate formalities. These are official notes of everything that happened at the meeting. The minutes don’t need to be filed with the state but must be securely stored alongside the organization’s other records.
It’s incumbent upon the organization to keep accurate and detailed minutes of all meetings. The minutes will typically include information about the date, time, and location of the meeting as well as the names of attendees present. The agenda and topics discussed are recorded as well in addition to any other proposals and votes taken. Decisions made after deliberations are highlighted in the minutes too.
Once the meeting ends, the minutes are to be circulated among the attendees for approval. They become an official company document once the approval is granted. Keep in mind that any director, officer, or shareholder can exercise their legal entitlement to ask for copies of the meeting minutes. Ensure timely distribution of the minutes for all lawful requests.
What Is Written Consent to Action?
There is a provision in some state laws whereby corporations are allowed to take an action without holding a meeting of the board of directors. There is a caveat, though. It can only be done as long as prior written consent is obtained by the minimum number of attendees required to approve action if a meeting had taken place.
This is what’s known as Written Consent to Action and they’re considered a part of the meeting minutes. The written consents obtained in such scenarios from one or more attendees should be secured alongside the corporate minutes and must be treated as such. It’s a particularly effective method for small S corporations as repeated meetings can quickly become a burden.
Don’t Let Compliance Worries Hold You Back
Compliance is a real concern for business owners. You never want to find yourself on a regulator’s bad side. Compliance issues can quickly sidetrack you and prevent you from focusing on what matters the most, growing your business to new heights.
That’s why countless business owners trust doola Books to free themselves from the stress of bookkeeping, an essential compliance task. From proactive invoice management to powerful merchant integrations, income and expense tracking, financial reporting, and more, doola Books does it all, freeing you from the mundane tasks to focus on the big picture.
Are there any specific rules or regulations for S Corp board meetings?
There are no specific rules or regulations for S Corp board meetings. An organization can conduct them in a manner that it feels fit, as long as attendees can communicate clearly with each other.
Do S Corp board meetings require a specific number of motions to be passed?
There’s no specific number of motions that must be passed in S Corp board meetings. The agenda can have one or more motions. It primarily depends on how many items are on the agenda.
Can proxy voting be used during an S Corp board meeting?
Yes, proxy voting can be used during an S Corp board meeting. An attendee can authorize someone else to participate in the meeting on their behalf and even cast votes if a proposal is put up for a vote. Rules for proxy voting are typically outlined in an organization’s bylaws.
Can resolutions be passed by email instead of during an S Corp board meeting?
Resolutions can be passed by email instead of an S Corp board meeting, provided that written consent to action is obtained by the minimum number of attendees that would have been required if the meeting were to take place.
Can board meetings be held outside of the United States for an S Corp?
It typically depends on the bylaws of the organization. If they specifically state that board meetings can be held outside of the US for an S Corp, then they can be conducted as such, though typically most S Corps would conduct the meetings at their registered office address.