The corporation is the most used form of business entity in the United States. While many people form the entity, most don’t understand the corporate minute requirements.
A corporation is a stand alone business entity. It is favored as a business form by many people because it provides iron clad protection for business debts. These debts can include judgments from lawsuits, debts owed to vendors and so on. The basis for this protection is the fact that corporations are considered to be an individual separate from the shareholders. In practical terms, this means investing in the corporation is like giving your friend Bob money for a business idea. Unlike Bob, you can be intimately involved in the running of a corporation.
The legal fiction of individuality of the corporate entity is not absolute. Much like a body, you have to maintain the health of the corporation to receive the protection. In what is probably a terrible analogy, the shareholders and board of directors much hold meetings much like you or I would go in for regular health checkups. If these meetings are not held, the idea that the corporation is a separate individual can be challenged. This process is known as piercing the corporate veil of protection.
Assuming the shareholders and board of directors take the necessary steps to keep the corporate body healthy, there has to be some proof that the steps were taken. Welcome to corporate minutes. Corporate minutes are simply the record of when meetings occurred, who attended, what was discussed and what decisions were made. The minutes of the meeting are kept by the Secretary of the corporation. He or she then presents them to the Board of Directors for approval at the next meeting. Assuming the board approves the minutes as being accurate, they are then filed in the corporate book where they remain until the sun runs out of fuel.
So, what goes into the actual corporate minutes? Technically, the Secretary should follow the requirements listed in the bylaws of the corporation. With small business corporations, however, the Secretary can usually get by with simply recording a summary of the subjects discussed at board meetings, who was there and the decisions made with the vote count for each decision being noted. With larger businesses, the minutes should be handled in a manner that strictly follows the dictates in the bylaws.
Corporate minutes may sound a bit confusing when you first hear about them. They really are not as this article indicates.