- Corporate Minutes are required for your corporate housekeeping
- Corporate Minutes can help you save taxes and support tax deductions
- Corporate Minutes and formalities can help you avoid business problems
To preserve the legal benefits of incorporation, corporations must hold regular directors’ meetings. By keeping clear and appropriate records of these meetings in the form of corporate minutes, companies can save taxes and avoid business problems.
Properly documented transactions are more assured of getting favorable tax treatment. For example, compensation to an employee-stockholder is tax-deductible only if it’s necessary and reasonable for business operations. When setting corporate officer compensation, consider recording comparable industry salaries, the officer’s scope of responsibility, job qualifications and experience, and current economic conditions. Documenting all these factors via the corporate minutes will be evidence to support that the compensation was reasonable and, therefore, tax-deductible.
Other business matters with potential tax consequences should also be carefully recorded in the corporate minutes. These include loans, leases, or other transactions between officers/shareholders and the company; dividends; bonuses; and deferred compensation arrangements. Your goal should be to clearly document in the corporate minutes the business intent behind each decision.
But you may not want to record everything. Generally, firms should record only final decisions, not the detailed discussions that led to those decisions. If a particular corporate decision is challenged later, you don’t want a record of the differing opinions before consensus was reached. This can give fuel to those who want to question how the company acted.
Keeping complete and accurate minutes of your corporate meetings may seem like a bothersome task, but the time spent now can save your corporation a great deal of money later. So, get with your attorney and make sure you hold yearly meetings and document the corporate minutes. It is also a good time to ensure you are preserving the formalities of your entity.
Moskowitz LLP is a tax law and accounting firm that has dedicated over 30 years to representing individuals and businesses with civil and criminal tax problems, cleaning up accounting and tax messes, and providing tax and accounting advisory services. We offer practical and affordable tax and accounting solutions for businesses.
Remember a blog post or email blast is not a substitution for obtaining personal legal and tax consultation. This information is not intended to be legal or tax advice nor does it form an attorney-client relationship between us.