Let’s be honest: keeping minutes of directors (and shareholders) minutes is a pain. Many business owners ignore it (frequently regretting it) until they sell the company or they get notice of an IRS audit. Keeping minutes of directors and shareholders meetings, while a thankless job, is important. Here are some important reasons why:
- The state’s corporation acts require it. You may be surprised to learn that both the Illinois Corporation Act and the Illinois Not for Profit Corporation Act require it.
- The IRS is interested in whether organizations are properly documenting their decisions. The form 990 specifically asks whether the organization is preparing contemporaneous records of meetings. Contemporaneous means not later than the next meeting, or 60 days after the date of the meeting.
- Minutes save time and provide a history of the organization. Did you ever get to a Board meeting and not remember what happened at the last one? Minutes can help save time and avoid misunderstandings. Minutes will provide the precise wording of a motion.
- Minutes can help avoid internal disputes. If somebody wants to fight a Board decision, it will be much easier if there is no written record of that decision. If you have a record of what was approved, the person who wants to fight it will have a much harder time, and may think twice about doing so.
- If one of two business owners lends money to the company, will the record show it was a loan? If not, the other owner may argue it was additional capital. If repaid, but not documented, then the IRS may say it is a dividend or compensation. Make sure all such actions are properly documented.
- Minutes can provide a record of what future actions the Board or staff must take. Often a decision on an action may be postponed. If you have it in writing, Board and staff members can easily remember and even put it on a tickler system for future consideration.
Yes, minutes are a pain. However, if you don’t have them, you are asking for bigger trouble. We can get you the help you need to prevent this.
Make sure you keep your records current. If you need assistance, please give us a call.