You followed all the requirements to register your business and have been operating your company. You timely submit all tax filings and renew any required permits and licenses. But how carefully do you maintain your company’s organizational documents and corporate records?
Whether you own an LLC or a corporation, this simple habit may save both expense and a headache: keep all organizational and corporate documents, including historical documents that can be followed to trace any changes in the structure, ownership or operations of the business in an organized folder.
The list of documents you should keep and update regularly may vary, depending on the type of company and the jurisdiction of formation. Among them here are ones you will most certainly be called upon to produce at some point:
- The Certificate of Formation or Incorporation
- The Operating Agreement or By-laws
- The initial consents of the members, incorporator and board of directors
- Consents appointing the officers or directors of the corporation (note: these appointments may have to be renewed annually, subject to the requirements of the applicable laws and Operating Agreement or By-laws)
- Copies of Share Certificates, if any, or a stock ledger
- Consents authorizing any transfer or redemption of membership interests or shares, and copies of any corresponding agreements
- Consents approving actions of the manager or board of directors
- Annual reports and tax filings
- Foreign qualification evidence, if any
- DBA evidence, if any
- Any amendments to any of the documents referenced above!
Keeping a record of some of these documents may not seem important now (especially if you are the sole owner of your company or a co-owner with a family member); but over time, you might come to learn the importance of having a written record of the above.
For example, if you decide to sell your business, the buyer will not only want to see all your corporate books and records, but will require you to certify that complete records of all such documents have been provided. If you are unable to provide the basic corporate records and documents, the administration and management of your business may be seen as unorganized.
You don’t have an Operating Agreement or By-laws?
You will likely have to have one prepared.
Your company By-laws provide for certificated shares, but you never issued any share certificates?
You may have to issue share certificates now or provide an affidavit explaining why you are unable to provide one.
You have been operating your business as the President, but have no documentation confirming your position as such?
The enforceability of any action you took as President can be questioned. You will have to have a consent drafted that officially appoints you as the President and authorizes all your past actions.
Overall, it is much easier to prepare and maintain a company’s corporate records in real time, rather than trying to piece together historical facts later on in order to prepare corrective documents.
