Discussion:Corporate Docs for Small Business (S Corp)
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Discussion Forum Index --> Tax Questions --> Corporate Docs for Small Business (S Corp)
| 11 March 2006 | |
| Is it required that a small business corporation (specifically S Corp with 100% Shareholder) needs to document minutes, meetings, shareholder loans, etc.? How do you hold a meeting when you're the only shareholder/officer of the company? Most small businesses just got online and incorporated instantly, even with NO shares of stock authorized or issued, some are LLC and some are not. Is this done correctly?
Anyone who's an expert in S Corp small businesses, please advise. | |
| 11 March 2006 | |
| My impression has always been that those minutes, meetings, etc. were basically just needed for liability protection. i.e. - if sued, and minutes,meetings, etc. were not documented, then the corporation may be ignored and the owners sued individually. But for income tax purposes I'm under the impression there is not going to be any change to your tax whether minutes are there or not. I assume a tax preparer just has to be ready to defend all positions (reasonable salary of owners, personal use of autos, proper handling of loans to/from corp by shareholder, etc)whether or not these issues are spelled out in minutes. I doubt the IRS will accept a $5,000 salary to an owner of a personal service type S-corp that has a bottom line of say $100,000, $150,000(you all know who you are!!) just because the corp minutes authorized it. Likewise, if $80,000 wages were paid to the owner and there were no minutes, then that should be just fine if those wages are reasonable. Just my thoughts. | |
| 11 March 2006 | |
| One more comment - my impression is that this is why the LLC's are so popular for legal reasons. I think it's because these small business owners never comply with these minutes, meetings, etc. required by corporations wherease LLC's legally do not require all these meetings, minutes, etc. Therefore, when the LLC gets sued, and there are no minutes, etc., that's fine, they are not required, and therefore the "corp veil" is not pierced and the individual owner sued. | |
| 11 March 2006 | |
| I think Scott's comments are correct. The IRS will recognize the existance of the corporation w/o minutes. But if you get into a suit and are looking for liability protection, corporate minutes will be one thing (among several) that the court looks at to determine whether the corporation is fact or fantasy. In other words, the minutes are a defense against "piercing the veil" of the corporation. All this being said by and accountant, not an attorney. | |
| 11 March 2006 | |
| And consider that you get some audit protection for hot issues, like the establishment of reasonable comp, documenting shareholder loans (tho' issuing interest and 1099's INT are worth more), and the like. This is why it's nice to actually have an attorney and to have a short meeting with the accountant to document and discuss any issues. Keeps you aware for one thing, and then you can document. | |
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