Forming an S corporation to operate your business offers numerous benefits. From potential tax savings and the ability to write off business expenses to the legal liability protection of a corporation.
While an S-corporation is a separate legal entity from its owners, to maintain that status, you must meet certain administrative requirements set by the Secretary of State or Department of Corporations where you reside or the company was formed.
In addition to annual filings, one of the main requirements is keeping meeting minutes. Read on to understand S corp meeting minutes requirements.
What Are S Corp Meeting Minutes?
When LLC owners elect to become an S corp, many don’t realize they must keep meeting minutes. S corp meeting minutes refer to the official written records of the discussions, decisions, and actions taken during the company’s meetings. The secretary of the minutes-taker will record all company resolutions, the outcome of voting, and the actions to be taken.
Generally, S corps must keep minutes of all official shareholder meetings and other official meetings by the board of directors or officers. S corp meeting minutes will also record who was present or absent from the meeting, as well as any voting and discussions.
In some states, S corp bylaws require you to have a quorum, which means a minimum number of people must attend a meeting to take a vote. The meeting minutes will also record whether a quorum was reached.
Are Meeting Minutes Mandatory for S Corps?
Yes, meeting minutes are mandatory for S corps. S corps are legally required to keep accurate and up-to-date meeting minutes to document their business activities. However, these requirements vary by state.
Most states require both C corporations and S corporations to keep meeting minutes. The exceptions are Delaware, Kansas, Nevada, North Dakota, and Oklahoma, where it’s not required but still recommended.
Note that S corp meeting minutes do not need to be filed with a government agency. However, they should be kept on file and readily available for tax audits or legal purposes. They also serve as an official record of actions to guide company decision-making and further actions.
How to Keep Meeting Minutes for S Corps?
The step-by-step process of recording and keeping meeting minutes for S corps is similar to other meeting notes. You’ll need to include:
Who was present at the meeting
Who was absent from the meeting
Issues raised or tabled
All votes taken and the results
Any resolutions passed
After the meeting, the secretary or whoever is designated to prepare the meeting minutes will need to distribute the minutes to all board members, shareholders, and officers. This can be done digitally in cloud-based sharing, by email, or in hard copy.
Each member, stakeholder, director, and officer should have a copy of the meeting minutes and is legally entitled to request a copy. After the minutes are distributed, the board must vote to adopt the minutes formally. This often occurs at the next board meeting.
What Is Written Consent to Action?
While state laws vary, S corporations generally may not take action on a matter without an official meeting. In certain states, you will need to obtain written consent from a minimum number of shareholders to approve an action. The written consent to action is considered an official agreement and should be stored with corporate minutes and treated as minutes.
For smaller corporations, written consent can be a simplified option for administration. In case of written consent to action, you don’t have to hold a meeting to approve the action.
What Are the Consequences when Meeting Minutes are Not Kept?
The consequences of not properly keeping meeting minutes vary by state. In states where it’s not required, your company may have difficulties communicating agreements on action with key stakeholders; otherwise, there are no issues.
However, in states where meeting minutes are required, failure to keep meeting minutes can result in serious consequences, including fines and penalties. In severe cases, S corporation could lose liability protection, exposing stakeholders’ assets. Or, the S corporation may be closed by the state.
Simplifying S Corp Administration
In addition to accurate meeting minutes, S corps are legally required to maintain accurate financial records as part of organizing the business. If you don’t want to hire a full-time bookkeeper, doola bookkeeping services can help.
Strong bookkeeping can make financial compliance easier and free up more time to focus on your core business. Get doola’s bookkeeping services so you can spend less time worrying about accounts and focus on new opportunities!
Can meeting minutes be prepared electronically?
Yes, meeting minutes can be prepared electronically. You can also sign or distribute meeting minutes electronically.
How often should S Corp meetings be held?
S corporations must hold at least one annual meeting. However, holding meetings more frequently can be beneficial if you want to take major actions or new directions.
Do all S Corp shareholders need to be physically present at the meetings?
All S corp shareholders don’t have to be physically present at the meetings. Depending on the corporation’s bylaws, you could hold meetings online. You will need a quorum, which may be less than all members, to vote on issues and pass resolutions.
Can S Corp meeting minutes be revised or corrected?
Yes, S corp meeting minutes can be revised or corrected. If you need to correct them after they have been adopted by the board, the corrections must also be officially adopted or approved by the board.
How long should S Corp meeting minutes be retained?
Generally, you should keep S corp meeting minutes for at least 10 years from the date of the resolution or meeting.