If you’re a corporation you are familiar with Annual Minutes, at least I hope you are. Annual Minutes are not to be confused with your Annual Report, which is what your state or the corporation commission requires you to file annually. Annual Minutes are yearly documents that record what occurs in your Annual Meeting, which is to be held each fiscal year by the directors, even if it is just yourself. What is included in these documents are the date & location of your meeting, who in the company attended, a summary of your company actions throughout the last fiscal year, and a statement as to what the company’s future resolutions are. Though they do not need to be reported, Annual Minutes must be documented in case an IRS audit were to occur. They will need such documentation to validate your company actions and if they perceive it as a tax risk, they could disallow benefits and in some cases, completely dissolve your company.
The vernacular for the IRS taking action in such a way is know as "Piercing the Corporate Veil." This basically describes the act of exposing an illegitimate company. If you take all the steps necessary to properly document your company actions, your company will pose no threat since there is no veil to be lifted in the first place. The landscape on how a company is to be managed has changed over time and even changes in real time. Next time I’ll discuss recent changes that you as a business owner might want to take note of.
