When starting a business, many entrepreneurs jump immediately into day-to-day operations. They often struggle to make time to develop systems for documenting how decisions are made. However, failing to keep a written record of the factors that lead to business decisions can increase the risk of liability if things ever go awry. As a result, it is best practice for every company to keep some form of meeting minutes.
What are meeting minutes?
Meeting minutes are the notes taken during a company's or organization's meetings. They are used to document the discussions, decisions, and resulting action items. For companies organized as corporations under state law, creating and maintaining minutes is often required. This requirement is tied to the requirement that a corporation hold at least one shareholders' meeting annually. However, corporate shareholders are free to have more than one meeting per year and they often do.
Regular meetings are not typically obligatory for limited liability companies (LLCs). However, conducting regular meetings and recording meeting minutes can significantly decrease an LLC's risk of losing its limited liability protection because this practice clearly demonstrates that it is an entity distinct from its owners. When this distinction is not clear due to a company's lack of formalities, such as the failure to take minutes at business meetings, courts may invoke a principle called “piercing the corporate (or limited liability) veil.” When an entity's veil is pierced, the owners can be held personally liable for the company's debts and liabilities. By keeping regular meeting minutes, the owners can strengthen their defense against any claimant who may seek to pierce the veil of limited liability.
From an administrative perspective, it is also highly beneficial to have a historical account of the company's evolution. Depending on the organization's intended goals, this background can ensure that the rationales for essential decisions made during company meetings are recorded so that the individuals carrying out those decisions understand the underlying objectives of what they have been asked to do.
Should single-member LLCs and sole shareholders also keep minutes?
If a company has only one owner, it may seem nonsensical to keep regular minutes from meetings conducted by the owner alone. Nevertheless, a single owner may be best positioned to benefit from this practice. In cases where there is only one owner, a failure to keep business and personal matters separate often makes it easier for a claimant to argue that company formalities have been disregarded and that limited liability protection for the owner should not exist. If you are a sole owner, regularly set aside time to document the company's significant events and decisions. Doing so will provide additional evidence that you and your business are separate and should be treated as such, protecting you from liability for the company's debts or obligations.
What should meeting minutes include?
When you are drafting organizational minutes, you should ensure that the following key elements are included:
- Names of the attendees,
- Date of the meeting,
- Location of the meeting,
- Agenda topics,
- Decisions made,
- Voting and outcomes, and
- Action items and parties responsible for carrying them out.
At the end of the document, ensure that a company representative (a member of an LLC or a shareholder of a corporation) signs and approves the minutes. Because meeting minutes often include standard items, many individuals develop a template for the company to use at each meeting. After the minutes have been drafted, keep them in a safe and accessible place. For corporations, state laws typically require safekeeping for minutes, as well as easy access for shareholders.
Call Our Office
If you own a corporation or LLC and need help getting organized and complying with Illinois' ongoing entity maintenance requirements, call our office today to set up an appointment. Our attorneys will help you identify the rules you need to comply with and guide your organization in carrying out the steps necessary to protect your business.