Many people have misguided opinions about the importance of a minute book. They think that because the law does not require minutes or meetings, you can throw away your book or fail to document your decisions. That is unfortunate and shortsighted, especially if you are the only person in the company.
Your minute book is a vital part of your toolkit for your business. It contains your legal documents, as I explained earlier, and is a good place to keep notices from the IRS and the state so you have everything you need in one place. It also contains your operating agreement, which contains the rules by which you agree to run the company. If you do not have an operating agreement, you are subject to the statutes of the state. So it is better to have an operating agreement that you can read and follow and change if you wish. You can’t change the statutes and I doubt you will take time to read them so you know what the rules are.
You should also document your decisions in the form of resolutions and place those in your minute book. If you go to court or are audited by the IRS you have to be able to show that you are running a professional organization separate and distinct from you, the owner. The easiest way to do that is to document your decisions that are of legal, tax or financial importance.
All professional managers document their decisions.
You probably know this if you have ever worked in corporate America. If you don’t hold meetings or create written consents to document your decisions, how are you going to prove that you are running a professional organization? The IRS certainly isn’t going to take your word for it, and neither will a court. Your minute book, with your completed setup papers and up-to-date with your resolutions is a great tool to show that you are running the LLC as an entity separate from yourself.
If you cannot prove this, the IRS or court will determine that you are acting as a sole proprietor. The IRS may then also determine that your business is just a hobby, and that will seriously impact your write offs. The court, on the other hand, will allow the opposing counsel to pierce your corporate veil and place everything you own both in the LLC and outside the LLC at risk.
All of this is explained in your membership modules – particularly the first one on paperwork.
We would refer you to Kari Allen VanNoy and her company Just A Minute, LLC to help with preparing your company paperwork.
Visit their website for more information: www.JustAMinuteLLC.com or call them at (480) 344-1870.