Do s corporations require corporate minutes?

Answer 1

An "S" Corporation (or "S" Corp) is a business that pays no income tax because all income and loss is passed through to its shareholders. This is a useful cost-cutting tax model for small businesses and independent contractors. One of the rules for compliance involves producing annual minutes. This is a report to the shareholders that, in case of an audit, the IRS might request as proof of a legitimately functioning business. As long as you understand what's required, creating your "S" Corp's annual minutes isn't nearly as daunting as it sounds.Difficulty: Moderately Challenging

Instructions

1. 1

   Choose a time of year when it will always be convenient to collect the information you'll need. Since you should include your profit-loss statement (or at least a summary of it) in your annual minutes, create these documents on the same cycle.

2. 2

   Keep a record of all your clients and projects throughout the year. A good way to jog your memory is to track your business' income through accounts receivable or funds deposited. That will always keep you in touch with where the money is coming from and, by extension, what you did to earn it.

3. 3

   Make a list of the ongoing procedures and one-time events that keep your business operating, such as how you find new clients, how you upgraded your software or repainted your office, and any unusual tax or legal issues that came up during the year.

4. 4

   Track any changes or glitches in your relationships with vendors and service providers, such as who you hired to do what, when and why your rent might have gone up, or how you dealt with your ISP when it dropped the ball on its Web Hosting duties.

5. 5

   Write just a few sentences about each client, procedure or relationship from the lists you compiled in Steps 2-4. You'll end up with an impressive looking report to keep on file in the unlikely event that anyone ever requires you to present this document.

Yes. An S-Corporation is simply a corporation, like any other corporation. Corporations are creatures of state law. The S election is merely a tax election which provides, basically, that the revenue and expenses of the business will pass through to the shareholder's return as if the corporation did not exist. There are tax benefits and sometimes disadvantages to the S election.

However, under State law, the corporation should have an annual meeting of stockholders to elect the officers and directors and should create minutes of the meetings of the Board of Directors and stockholders. See e.g., Illinois Business Corporation Act.

The minutes and other corporate resolutions provide benefits to the shareholder - by preserving the corporate form the shareholder is insulated from personal liability if the business incurs a loss or judgment.

Edward X. Clinton, Jr.

Chicago, Illinois