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An annual shareholders meeting must be held to validate your corporate status.
At the meeting, directors should be elected. Then a Board of Directors' meeting should be
held to elect officers. This should be documented in meeting minutes.
Many corporations hold their annual shareholders' meeting in their attorney's office
(similar to an individual's annual medical check-up). It is an excellent way to
discuss any questions you have, verify that your corporate status is secure,
and keep your attorney current with your business so that (s)he can better serve you.
Having a specific appointment will also discourage you from postponing your Annual Meeting.
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| Forms to use | |
Annual Shareholder Minutes
Waiver of Notice for Shareholders Meeting
Annual Board of Director Minutes
Waiver of Notice for Directors Meeting |
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| Due date |
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Your bylaws state the required annual meeting date
(section 4.02 of the bylaws).
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| What to do |
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Before your corporation's anniversary date:
- Hold your annual shareholders' meeting to elect new directors.
- Be sure to follow any notification requirements set forth in your
corporate bylaws.
- Record the election in corporate minutes.
We have included sample minutes which you can add to, alter or delete to fit your needs
(except that you must elect directors).
- Shareholders should authorize any loans,
leases or other transactions between the corporation and insiders (directors or officers)
but please consult an attorney first or you may invalidate your corporate status.
- Adjourn the shareholders' meeting and hold a Board of Directors meeting with the
new directors. The directors should elect officers and review the annual corporate checklist shown below. all decisions should be recorded in corporate minutes.
We have included sample minutes which you may add to, alter or delete portions.
If you change your officers or directors, complete a new
Statement of Information.
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| Annual corporate checklist |
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You can help prevent many problems if your Board of Directors verifies each year
that:
- Personal and corporate funds have not been mixed.
- Payments to shareholders have been documented in minutes and financial records
so that each payment falls into one of the following categories:
- Salaries. If shareholders have worked directly for the corporation, they should be
treated as employees with appropriate employee tax withholdings.
- Dividends. Any dividends should have been paid to all shareholders according
to the percentage of shares owned - and C-corporations should have issued
1099-Div forms.
- Director fees: Director fees should only have been paid for work required as a
Board member. If more than $600 was paid to a Board member, the corporation should have
issued a 1099-Misc form to the IRS and the Board member.
- Interest on loans: Loans should have been documented and
1099-I should have been issued.
- Funds from shareholders should have either been documented as loans to the corporation
or stock should have been issued. Either way, this should have been documented in
the corporation's minutes.
- The corporate minutes should show the following actions were taken by the Board of Directors:
- Elected officers
- Approved any changes to the officers' salaries
- Approved any significant transactions that the corporation has taken or expects to take
- Authorized major negotiations or contracts
- You should know where these items are and verify that they are up-to-date
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| Minutes |
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In addition to describing the actions that were taken, your minutes should include:
- The pros and cons of any controversial decision
- Key factors that you considered and how that decision will benefit the corporation
- Who voted for, against, or abstained from each resolution or indicate that the vote was
unanimous.
- When someone leaves or arrives during the meeting in relation to the business voted upon.
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| Warning "inside transactions" require legal advice! |
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There are specific laws (Corporation Code sections 315 and 310) that you must
follow if there are "insider" transactions such as loans or leases between the corporation and
its directors or officers. Do not act without legal advice or you may invalidate your
corporate status.
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| Questions? |
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Contact your attorney.
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