Single member LLCs often ask themselves this question. What is the benefit of having a meeting with myself to document major decisions...Read More...
Single member LLCs often ask themselves this question. What is the benefit of having a meeting with myself to document major decisions in the company? There are a few:
1. Succession Planning. Very little of a company’s history is ever reduced to writing unless the owners keep annual minutes. If something happened to you, it would be difficult for someone to step into your shoes to run the business without minutes that document at least the more significant decisions over the course of each year. Minutes help new or changing leaders understand past decisions and maintain continuity in management and governance.
2. Litigation Avoidance. If any liability befell your business, it’s possible a plaintiff would try to pierce your corporate veil to get at your personal assets. One pathway is the “alter ego” argument. If your business doesn’t really operate and is only the “alter ego” of the owner, which especially applies to some “shell” companies, the plaintiff will ask the court to disregard the corporate protections and hold the individual owners liable. Some attorneys believe that single-member LLCs are especially vulnerable to alter ego arguments, and having a history of observing corporate formalities like annual minutes helps defeat that argument.
3. Documentation. If you have partners, meeting minutes provide a record of decisions, documenting what was discussed, decisions made, votes taken, and who attended, which supports transparency and accountability within the company. Clarity in the record can also prevent or resolve disputes among members, directors, or shareholders by providing a written reminder of the rationale behind decisions.
For LLCs, while most states do not require annual meetings or minutes, maintaining minutes is a recommended best practice, especially if required by the LLC’s operating agreement. It supports transparency, helps maintain liability protection, and documents major decisions.
