If you have a limited liability company, an S Corp, a C Corp, a partnership, or anything that's formal and a legal entity, you need to hold an annual meeting in your business and document certain things that have been decided.
Your business is not you. It's a separate entity, and the IRS sees it as separate from you. So you must do this as an agreement between you and your company. This lets the IRS know that you understand what you're doing and that you're treating it that way so you're not breaking that “corporate veil.”
If you don't do it, it could very well harm you with your taxes and your legal entity because the IRS could see it as a fault or a breach.
When to Host
The first quarter of the year is an excellent time to host this meeting because a lot of times, it's an opportunity to prove the financials for the prior year along with any decisions you've made for the current year. Then you're documenting those decisions through your meeting minutes which matters a lot to the IRS.
One of the benefits of doing this in the first quarter is that you're approving the financials for the prior year, which helps you get to the table with your taxes.
Where to Host
Business owners can take this opportunity to hold it outside their house and make it sort of a destination meeting. Doing it someplace else allows you to get away from the day-to-day operations, pick your head up, and deal with the things you need to deal with without any distraction.
You may also choose to host it at home. Regardless, you don't have to overcomplicate it and you just have to host it.
How to Host
Identify when the meeting happened and the time it happened. A quorum means there's a majority. Identify who's there and what percentage of the entity do they own. You can invite guests to the meeting, including advisors that consult with you in your business.
If you're only one person, this could be a great opportunity for you to invite a trusted advisor to your annual meeting. This gives you a sense of accountability aside from getting good advice from them.
Now, if you have a C Corp or an S corp, you might need to appoint a chairperson or a secretary. You may also need to get some counsel about language on titles. This is where titles matter does because your duties and responsibilities are essentially outlined in your operating agreement or your articles of incorporation.
Things to Discuss During the Shareholders Meeting
- Your financials (income statement and balance sheet)
- Annual goals and changes to your long-term goals
- Annual stats on IT compliance
- Organizational health scorecard to keep your pulse on how you're doing on things that are important to you and where you need to focus your efforts in the coming year
- Distributions
- Authorization for any corporate action
If you want to learn more about more topics to discuss during your annual shareholders meeting, check out Episode 078: Topics To Discuss During Your Annual Shareholders Meeting.
