Depending on the business structure your clients have chosen and the state they are registered in, they may be required to hold an annual meeting and record minutes. Let’s take a moment to discuss what an annual meeting and annual meeting minutes are, their purpose, and what your clients should know if they haven’t yet completed that essential business compliance requirement for 2020.

What is an annual meeting?

Businesses structured as a limited liability company or corporation may need to hold an annual meeting with their owners (LLC members or corporate shareholders) every year. Generally speaking, annual meetings provide a forum for discussing a company’s goals, strategy, financial situation, and proposed changes to governance documents or other important decisions that require approval or a vote by owners. Whether a business must hold an annual meeting varies by state and entity type.

If a business formed as an LLC or C corporation has elected S corporation status for tax purposes, it must follow the state’s annual meeting requirement for the underlying entity type. For example, an LLC that is an S corp is responsible for fulfilling the state’s annual meeting requirements for limited liability companies. Likewise, a C corp that is taxed as an S corp must follow the state’s annual meeting rules for C corps.

Meeting minutes serve as an official record of what annual meeting attendees talked about, the decisions they made, and actions that they took. Rules about recording and handling annual meeting minutes may differ depending on the state.

Ideally, a business should make its minutes a part of its permanent records. At a minimum, experts advise keeping them for at least seven years. The minutes should be available to LLC members or corporate stakeholders (shareholders, officers and directors) if they request to review them.

LLCs

Generally, states don’t require LLCs to hold annual member meetings and write minutes. An LLC’s operating agreement, however, may require annual meetings and recording of minutes. When that’s the case, it’s critical for the LLC to follow through with that requirement to demonstrate adherence to business compliance. It helps validate that business owners are treating the limited liability company as a separate legal entity, thus helping to maintain the “corporate veil” that protects LLC members’ personal assets from the company’s legal and financial liabilities.

LLC annual meeting minutes usually include:

• The meeting’s date, time and location;
• Who wrote the minutes;
• The names of the people in attendance;
• A brief description of items on the meeting agenda;
• Details about what the attendees discussed;
• Decisions made or voting actions taken; and,
• The time that the meeting adjourned.

All persons attending the meeting should have an opportunity to review and amend the minutes before making them an official part of the LLC’s records.

Corporations

Most states require companies registered as a C corporation to hold an annual shareholders meeting and record minutes. Typically, a corporation’s bylaws establish how the notice of annual meetings will be given (state laws may have basic requirements for notice), the order of business that should be followed in meetings, and the quorum (minimum number of shareholders present) to hold a vote at meetings.

Examples of information within a corporation’s annual meeting minutes include:

• The date, time and location of the meeting;
• Who attended the meeting;
• Who recorded the minutes (usually, the person serving as the corporate secretary);
• Meeting agenda items and a brief description of each;
• Details about what attendees discussed during the meeting;
• The results of any voting actions taken; and,
• The time when the meeting adjourned.

After annual meeting minutes have been approved (as determined by the company’s bylaws), the corporation should keep the original executed copy in a safe place along with other corporate records (such as articles of incorporation, resolutions and bylaws).

Beyond the regular annual shareholders’ meeting, a corporation might also hold special shareholders’ meetings for significant actions (such as mergers, conversions, etc.) by its board of directors. Also, corporations must hold board of directors meetings (generally, at least once per year) to address strategic planning and make decisions such as issuing stock, opening new financial accounts, taking on new debt, declaring dividends, discussing legal and tax issues, and more.

The clock is ticking

If a client hasn’t yet conducted an annual meeting and recorded minutes, they should act quickly to get it done before the end of their fiscal year. Annual meeting minutes are an important business compliance requirement, helping to keep a company in good standing with the state and maintain its protective corporate veil.

It’s easy to find templates online that provide a basic format for meeting minutes. Using a template can ensure that minutes follow a consistent structure from one year to the next. Because of the potential legal implications associated with business compliance, you might suggest that your clients get advice from an attorney about their business’s annual meeting and minutes obligations.