September 2015

4 Reasons To Tend Your Corporate Records

As a business owner, you are busy. You have day-to-day operational responsibilities, employees to manage, and long-term business objectives to achieve. These important tasks can often distract from other corporate matters, including attention to your corporate records. Other than the fact that your company's bylaws likely require it, here are 4 reasons to tend your corporate records.

1. Tax Classification: If there is ever a question as to your company's income tax classification, the Internal Revenue Service may need to examine certain corporate records to determine if the company's actions reflect the purported tax classification. You can prepare for this by keeping records, such as resolutions and tax documents, that are consistent with the classification you desire.

2. Creditor Protection: Proper corporate records show that the company is operating appropriately and that it is, in fact, a separate entity. Without them, creditors may attempt to assert that the company and the owners are one and the same, effectively eliminating the corporate shield that otherwise protects business owners from personal liability.

3. Banking: While banks assess the creditworthiness of a company seeking a loan, they also confirm that the named borrower is duly authorized to request the loan. The authorization will likely be found in the minutes of the directors or managers. Updated records will facilitate a smoother loan process.

4. Potential Purchasers/Investors: When you seek to sell your business or locate outside investors, one of the first things a potential purchaser or investor will request is to see your corporate records. Updated and organized records not only give outside parties immediate information, such as current directors or officers, but they also reassure others that your business affairs are in order.