Why doing annual meeting minutes for your LLC or Corporation is so important
By: Andrew Hoffman, Attorney
When it comes to preparing annual meeting minutes, your responsibility for a business entity varies, depending on whether it is an LLC or a corporation. Each are discussed below.
Under Nebraska law, an annual meeting is required to be held by the shareholders. See Neb. Rev. Stat. §21-253. Notwithstanding the technical legal requirement, completing your annual meeting minutes, each year, will go a long way in providing you with the benefit of the liability protection that you are wanting to maintain.
Although annual meeting minutes are not technically required under Nebraska law, they are strongly recommended by virtually all legal practitioners. Moreover, most standard operating agreements require that annual meetings be conducted, which then does make it a required formality for your business entity. Not doing them can spell disaster for the members, from a liability standpoint.
Piercing the Corporate Veil
While you may have formed a business entity for various reasons, one of the primary benefits of utilizing an LLC or a corporation is that it affords you with liability protection. Whether it be tort liability or contract liability, if something goes sour in the course and scope of your business activities, a business entity may operate to shield and protect your personal assets from being exposed to the liability creating event that occurred through the LLC or corporation. This is a good thing.
However, in a lawsuit, if your LLC or corporation is sued, a process known as discovery will occur. During this discovery process, a good plaintiff’s attorney is going to try to find a reason for the Court to ignore the LLC or corporation liability protection and will attempt to attack your personal assets. A plaintiff’s attorney may be successful if they are able to show that the shareholders (corporation) or members (LLC) did not properly maintain their business formalities. A lack of utilizing good business formalities, may result in an action known as “piercing the corporate veil.” If a pierce occurs, then not only is your LLC or corporation liable, but your personal assets are likewise exposed.
During the business formation process, we educate our clients as to what the business formalities are, and why it is so important to follow them. Business formalities include, but are not limited to:
- Maintaining a separate set of financial accounts (do not commingle business funds with personal funds)
- Proper capitalization (the company must have appropriate assets to conduct business)
- Following company formalities (holding annual meetings, keeping minutes, adopting by-laws or an operating agreement, among other important items)
Accordingly, the availability of annual meeting minutes for your company will be an extremely valuable tool to have in your defense arsenal in the event of a lawsuit. If you are sued, your annual meeting minutes will be requested by the other side. If you cannot produce them, it will put your personal assets at risk, regardless of the state law requirements.
Business Maintenance Plan
As a service to our business clients, Andrew Hoffman Law PC, LLO offers our clients a Business Organization Maintenance Plan. This plan will take care of your annual meeting minutes in a hassle-free manner, while at the same time providing other value-added benefits to your business.
We generally finalize our annual meeting minutes for the prior year during the first quarter of the following year. If you would like our office to prepare your 2019 annual meeting minutes, and for the subsequent years, please contact us by sending an e-mail to Andrew@AndrewHLaw.Com.