Sometimes, a new business owner “bootstraps” it and ventures out to set up her corporation or limited liability company herself. Not knowing any better, she files with the secretary of state (hopefully the proper forms) and receives a certificate in the mail. The staff at the secretary of state’s office is not permitted to provide customers with any legal or accounting advice.
A year or two later, flags start to go up as she is being asked questions about operating agreements, bylaws, shareholder or membership journals, minutes, and resolutions. She realizes that her business structure is not complete.
Previously, we introduced a list of areas that a business owner may want to schedule time to address each month.
The first area is: Review and complete the legal aspects of your business structure. Is your LLC or corporation complete? Do you have all documents necessary to show its existence, ownership, and decisions? Operating agreement? Bylaws? Minutes? Ownership journal and certificates?
A complete corporation or limited liability company is one that has established and maintains all of the documentation necessary to evidence its existence, its ownership, and its decisions.
Existence of a business entity is evidenced through its organizational documents such as articles of incorporation/organization, certificate of incorporation/organization. These documents are often stored by a government agency and are part of the public record.
Ownership of the entity is evidenced by things such as stock certificates, membership certificates, shareholder and membership journals, subscriptions to ownership interests, shareholder agreements, and operating agreements. Such documents are often maintained privately within the company’s internal records.
Decisions of a corporation or limited liability company are evidenced by minutes of meetings, resolutions, operating agreements, code of regulations, and bylaws. The corporation and limited liability company are each recognized as a person under the law. However, they do not have a physical body. As a result, the official decisions and actions of the company are evidenced by and communicated through its written documentation.
For more details on this topic check out my blog post at www.MosesLaw.pro.