What do you mean by corporate minutes? Each year, a corporation should have a shareholder’s meeting. And the purpose of the shareholder’s meeting is to elect the directors of the corporation. So, that should be one meeting. And not all shareholders are necessarily directors, although in most small corporations the shareholders do serve as directors and officers. But you need to have separate meeting minutes for the shareholders, and their purpose is to elect the directors.
The other corporate minutes are director’s minutes. In the director’s minutes, the directors will elect the officers of the corporation; that’s the function of the directors rather than the shareholders, so you have separate minutes. And so, the directors elect the officers, and also set forth any particular corporate loans, or anything out of the ordinary, particularly if there’s been shareholder’s loans, or if you’ve loaned money to shareholders or the shareholders have lent money. Then, they need to authorize the loans in the director’s minutes to the president of the corporation. So, you need to have two sets of minutes; one for shareholders, and one for directors.
If you’d like an information sheet and assistance in preparing your corporate minutes, whether they be shareholders or directors or both, and/or filing your annual report, give me a call at 727-847-2288. Thank you.
When I buy a business am I buying the debts? Well that all depends on whether or not you are buying the business entity, such as the stock in a corporation or if you are buying the assets. Most of the business sales contracts that I review are a sale of the business assets, so you are not agreeing to pay any of the debts. You simply contract to buy the good will, which is the name of the business, the phone number, the trade name, as well as the business assets; such as the fixtures, equipment and also inventory. Usually with the accounts receivable, if you have those in a business, stay with the seller and so it’s up to him to collect those monies. In an ordinary business transaction you do not assume the debts of the seller.
That is all specified in a contract for the sale and purchase of a business. One of the big assets of a business is a lease, so you certainly need to be sure that you assume and the lease is assigned to you at the time of closing so you do not wind up with a business and not have the lease put into your name. So you would be assuming that obligation.
You also may be assuming obligations if certain equipment is financed; that’s another obligation you would have. However, as far as vendors are concerned, such as your suppliers, then you are not assuming that debt. Although it is a good idea to verify that the vendors will continue to supply you with the product or whatever it is; even if the former owner of the property failed to pay them. That would be an impact on you, but you do not have to pay the debts of the former owner when you only buy the assets.
The utilities are something else that you need to be careful of; also sales tax. You need to make sure that there is no outstanding sales tax that could be a lien against the equipment, as well as tangible property tax.
Now you do assume all the debts of the business if you simply purchase the stock in a corporation. Then you get all the assets and all the liabilities. You need to be careful when you sign the contract to address all these issues.
So if you would like to have me represent you or prepare a contract for the sale of a business well give me a call at 727-847-2288.
Why do I have to file corporate minutes? Well, first of all you don’t file corporate minutes, other than your corporate record book. The reason you have to have shareholder meetings and board of directors meetings is to act like a corporation, in that you have shareholders and they meet once a year to elect the directors of the corporation and then the directors meet at least once a year and they elect the officers of the corporation and make major decisions as far as the business is concerned. So if you don’t have corporate minutes or corporate meetings or shareholder meetings and directors meetings, then you’re not acting as a corporation. You are just fooling yourself and proceeding on as far as it’s your business and you are incorporated.
So what I find many times is people have incorporated, however, they have not issued any stock. They don’t have a corporate book and they don not do corporate minutes. So what does this mean? Well, if you get sued and they can sue you personally, which is probably one of the biggest reasons why you have a corporation is to limit your liability for the business debts or liabilities. So if you don’t act like a corporation and have shareholder minutes and director minutes, well then you’re not acting like a corporation and therefore, could have personal liability for the debts of the corporation. You also need to be sure that the stock is issued and you have a corporate record book with the stock in it or some record of it.
What you do file with the Secretary of State is your annual report and that costs you $150.00 or $200.00 a year and the reason you have to file that every year is because it’s a form of a tax and if you don’t, why then the Secretary of State will dissolve the corporation. And you need to be sure to file it timely because the penalty is about three times what the filing fee is. So be sure that you file by the deadline, which I believe is May 1 of each year. And you need to be sure you get your annual report filed with the Secretary of State.
So if you’d like for me to assist you in the preparation of your minutes or setting up a corporate record book, give me a call at (727) 847-2288.
What steps do I take when I want to form an LLC? Well, the first thing we need to talk about is, Why are we forming an LLC? Presumably, the purpose of doing this is to try and protect your personal assets from the business liability so that if your business gets sued that they can’t take any of your personal assets.
Now an LLC is different than a – it’s sort of a hybrid between a partnership agreement and a corporation and it does afford the parties limited liability; however, it is a little more complicated than a corporation since you don’t necessarily have officers and directors and they have particular duties.
In an LLC you have managing members or a managing member and that’s all designated under an operating agreement. The operating agreement designates what each party is supposed to do and also it shows who is the ownership interest in an LLC.
Now any number of people that I see come in and say, “Oh, I have an LLC,” and I say, “Well that’s just terrific, can I see your operating agreement?” and their eyes glaze over, roll in the back of their head and they don’t know what I’m talking about. So I say, “Well, who owns that?” “Well, I do,” or they tell me who it is. “Well, where is that,” because that’s what the operating agreement does. It lets you know who owns it. It’s sort of analogous to a corporation whenever you don’t issue any stock.
Well who owns it, you know, if you don’t have any shareholders, well, nobody owns it. So with an LLC it’s fairly complicated. For that reason I suggest that whenever you’re talking about setting up an LLC let’s talk about why you want to set it up and the advantages of an LLC versus a corporation.
So if you have a going concern a corporation is probably much easier to handle and to be in – affords you more liability protection than an LLC, particularly if you are a single member LLC. If you’re the only one interested there’s been several cases that says well, they can get your personal assets or go through the – get the LLC assets for your personal debts.
So before you jump into an LLC or go on-line and set it up I suggest that you might want to think about setting up an appointment and let’s talk about setting up an entity that will accomplish what you want because, if you simply set up a corporation, don’t issue any stocks, well, you may not have afforded yourself any protection from your creditors’ claims, and if the corporation gets sued then you may be personally liable for the assets. So if you have some questions about setting up an LLC or corporation, give me a call at (727) 847-2288.