Corporate records are official documents of your organization to validate its existence, provide rules for governance, memorialize how your entity will operate, and document who has the authority to engage in business activities on behalf of your business. Most importantly, some corporate records are required by the IRS or the state where your entity is registered to prove that the entity is separate from its owner(s).
When you are a small business, corporate records may not be important until you decide to open a bank account, get a business loan, bring in partners, or sell your business. Hence, all of these events will require a third party to review your corporate records to determine if your business is properly run and maintained.
Who maintains corporate records?
Regarding the maintenance of corporate records, it is worth noting that the corporate secretary, legal department, or compliance department is responsible for keeping records in either electronic format or in a corporate binder. In a small business, however, it is possible that the company’s lawyer or owner may handle record-keeping duties.
Moving on to record-keeping practices, it is important to note that all entities should maintain some fundamental financial and non-financial records. These records may include, but are not limited to:
- Copies of federal and state tax returns
- Business licenses and permits
- Correspondence with regulators and taxing authorities
- Location of records and their format (digital or print)
- EIN letter
Common Corporation Records for a Corporation
1. Articles of Incorporation
Articles of incorporation are the initial documents filed with your state secretary to form your corporation. It includes the following:
- Name of the corporation
- Purpose of the corporation
- State of incorporation
- Type of corporation (i.e. general or professional corporation)
- Number of shares authorized
- The par value of the stock
- Name of registered agent (or agent for service of process) – a person or registered company with a physical address within the state of incorporation. This person or company is responsible for accepting legal documents on behalf of the corporation.
- Incorporator – the person who filed the article of incorporation paperwork
- List of directors and officers – some states may require a separate form to report these individuals. Directors and officers include a president, treasurer, secretary
2. Bylaws
Corporate bylaws are the rules set forth by shareholders for operating a corporation. Bylaws create structure and legitimacy for a corporation when faced with lawsuits, shareholder disputes, or other business activities. The following are examples of common provisions including corporate bylaws:
- The number of members on the board of directors and election terms for directors.
- How shareholders, officers, and directors are appointed and removed.
- Determines who has the authority to transact on behalf of the corporation
- Location of the corporate books and records.
- Frequency and location of shareholder meetings.
- Voting rights. Bylaws would state if the corporation has different share classes and/or voting rights.
- Instructions on voting shares and appointing proxies.
- Committees, as created by a corporate resolution.
3. Shareholder Agreements
A shareholder agreement is a legal document that outlines the rights and responsibilities of the shareholders of a corporation. Hence, it is a contract between the shareholders that governs how the company will be managed and operated, and it typically covers issues such as the distribution of profits, the appointment of directors, the issuance and transfer of shares, and the procedures for resolving disputes.
Often, shareholder agreements are used in private companies or closely held corporations where the shareholders are also involved in the day-to-day management of the company. They cover a variety of issues, such as voting rights, dispute resolution procedures, share transfer restrictions, and more.
Some of the key provisions that may be included in a shareholder agreement include:
- The number of shares each shareholder holds.
- The rights and responsibilities of each shareholder
- The procedures for transferring shares
- The procedures for resolving disputes between shareholders
- The procedures for appointing and removing directors
- The distribution of profits and dividends
- The procedures for selling the company or going public
- The procedures for winding up the company in the event of dissolution.
Overall, a shareholder agreement provides a framework for the management and operation of a company, and it helps to ensure that all shareholders are treated fairly and that the company is managed in the best interests of its owners.
4. Minutes
Corporate minutes are a formal record of meetings and decisions made by the board of directors and/or shareholders of a corporation. These minutes are usually taken by a designated corporate secretary, who records the attendees, the topics discussed, the decisions made, and any other important details of the meeting.
Corporate minutes serve as an official document of the corporation and provide evidence of the actions taken during a meeting. Moreover, they are often used for legal and regulatory compliance purposes, and can also be used as a reference for future meetings or as a historical record of the corporation’s decisions and actions.
Corporate minutes usually include the following information and are kept in the corporation’s official records even though they have no formal template:
- Date and location of the meeting
- Names of those in attendance
- Motions or resolutions made
- Results of any votes
5. Board Resolutions
A board resolution is a formal document that records decisions and actions taken by the board of directors of a corporation. Board resolutions are usually adopted at board meetings and are recorded in the minutes of the meeting. Also, they may be drafted as standalone documents and included in the company’s official records, but must still be approved by the board. Additionally, they are important because board resolutions provide a clear record of the board’s decisions and help to ensure that the board is acting in the best interests of the company and its shareholders.
Examples of board resolutions include:
- Adding and removing authorized signers of the company’s bank accounts.
- Electing officers to the company
- Declaring dividends
- Authorizing stock buybacks
- Issuing new stock
6. Stock Certificates
When it comes to stock ownership, a stock certificate serves as proof of ownership of a specific number of shares in the company. Such certificates typically include details like the owner’s name, the number of shares owned, the company’s name, and the date of issuance. Nowadays, most stock certificates are issued electronically for easier transferability, but some companies still provide paper stock certificates.
Documents Required for a Partnership
Per the IRS, a partnership is an unincorporated organization with two or more members who carry on a trade, business, financial operation, or venture and divide its profits. A single person cannot form a partnership.
There are different types of partnerships, such as a Limited Partnership (LP), Limited Liability Partnership (LLP), General Partnership (GP), or Family Limited Partnership. The laws covering partnerships are covered in Internal Revenue Code Title 26, Subtitle A, Chapter 1, Subchapter K sections 701 to 777.
1. Partnership Agreement
A partnership agreement is an important document, usually created by an attorney, that outlines the key provisions of the partnership and governs the operations of the partnership. Not all states require partnerships to have partnership agreements, but it is highly recommended to protect partners and also help their CPA know how to allocate income/losses among partners.
What is included in a partnership agreement? Importantly, a well-written partnership agreement will cover:
- Who will make decisions on behalf of the partnership?
- Who has voting rights?
- How will partners allocate profits and losses among themselves?
- How can disputes be resolved?
- How the partnership will add/remove partners.
- Reimbursed expenses: Which expenses does the partnership pay on behalf of its partners?
- Unreimbursed expenses: what expenses are not paid by the partnership on behalf of the partners?
- Since the operating agreement is a binding contract, it will also include details of who has the authority to make changes to the agreement.
- Document oral agreements among partners.
- Partnership address and location of partnership documents.
2. A confidentiality agreement or non-disclosure agreement (NDA)
Partnerships use a legal document known as a confidentiality agreement or NDA to safeguard the partnership’s confidential information. Confidentiality agreements or NDA may include the following:
- Trade secrets
- Proprietary information
- Customer lists
- Financial data
- Marketing strategies
- Other sensitive business information
3. Common LLC Records
Since an LLC is a hybrid entity and can decide to be taxed either as a partnership, C-Corporation, S-Corporation, or a Single Member LLC, the documentation requirements will vary depending on which entity type is chosen. Furthermore, Some states require and highly recommend the following records regardless of how an LLC s taxed.
4. Articles of Organization
To establish an LLC, one must submit formal documents called “articles of organization” to the state.
Similar to the articles of incorporation, articles of organization include the following:
- Name of the LLC
- Purpose of the LLC
- Name and address of the registered agent or agent for service of process
- Address of the LLC
- Name of the organizer (the person submitting the form)
5. Operating Agreement
An operating agreement is very similar to a partnership agreement in a partnership and has some of the same key features. While both documents address many of the same issues, they apply to different types of business structures and have different legal requirements.
In addition, the term “operating agreement” refers to a legal document that outlines the management and operation of an LLC. It includes:
- Roles and responsibilities of members
- Allocation of profits and losses
- Voting procedures, and decision-making processes.
- Provisions for dispute resolution, amendment procedures, and dissolution of the LLC.
6. Corporate Kits
There are some companies that offer templated kits for corporations and LLCs which include many of the books and records documents. For instance, some of these companies include:
- Corporate Kit
- Corporate & LLC Kits
- Blumberg