You have an LLC and would like to think that it will protect your assets. In order to receive the asset-protection you are hoping for, it is important to hold annual board of advisors meetings at a minimum. It may be beneficial to have board meetings on a quarterly or semi-annual basis as needed. These would be board of advisors meetings for a non-corporate entity and board of directors meetings for S corporation LLC structures.
If evidence is uncovered that a corporate entity’s actions are not documented in historic or active record keeping, the shareholders, members, and management could lose personal liability protection – a situation referred to as “piercing the corporate veil.”
Board meetings may seem like a strange concept for those single-member LLC owners or shareholders. Are you going to have a board meeting with yourself? No. This is your chance to actually have a board of people that can speak into the business and provide valuable advice. Who should this board include? The first person I would recommend having on your board is your spouse if you are married. If the LLC is holding real estate, you could have older children on your board to teach them about business and the family holdings that they may one day inherit. If there is another partner or shareholder besides you, they definitely should be a part of the board meeting.
The first step for your board of advisors is to actually have a meeting. Set a date, time and place and take notes known as board meeting minutes that you should keep in your corporate book of record (a 3-ring binder that you buy at an office supply store).
The meeting can cover whatever is necessary to improve your business. I recommend three elements: 1) a review of the past 12 months; 2) a current snapshot; 3) where the business is heading in the future. This is a chance to set one-, five- and ten-year plans and create targets to aim for. Accounting policies and procedures should be discussed and formally accepted into the board minutes. Examples of accounting policies would be a plan for reimbursements and de minimis safe harbor asset capitalization policy (capitalized expenses below a $2,500 threshold).
Many other documents could be added to your book of record:
- Documents of formation and any amendments
- Bylaws
- Resolutions
- Officer and Director lists with address
- Meeting minutes
- Stock certificates
- Shareholders agreement (Operating agreement)
- All written communications to shareholders for the past 3 years
- Shareholder ledger/share transfers
- Annual report filings
- Income tax returns/sales and use tax filings
A little bit of ongoing maintenance with an annual board meeting will help to “respect the corporate veil”, creating evidence of an entity that is operating in a business-like manner.
Reducing Taxes – Increasing Wealth
Please understand that I cannot give you specific investment or legal advice, just guidance in these areas, and you should consult a professional licensed in these areas for specific advice before making any final decisions.
