If you run a business, you probably know that managing the gains of your company can be rewarding and exciting, but keeping records can be tedious. To comply with requirements mandated by your state, our experts will help you understand how to do proper corporate record keeping through this guide.
How to Do Proper Corporate Record Keeping?
What is a Corporate Record?
A corporate record is a vital document relating to your company. An example is your article of organization. Others include tax returns, meeting minutes, business ledgers, and everything else in between.
Generally, keeping proper corporate records has many benefits. One of which is you wouldn’t have to worry about your assets getting caught up in company troubles. However, that’s not the only reason to keep proper records. Corporations are required to have these records by law with legal repercussions for noncompliance.
Contents of Corporate Record
The specifics of corporate records vary from entity to entity. For example, some corporations have to keep numerous tax records and record every board meeting. Others only have to deal with little to no board meeting.
However, there are a few documents that you can generally find in corporate records. The following documents are:
- Articles of incorporation (including any new amendments made to the articles)
- Corporate bylaws
- Income tax returns (these often come along with proof for deductions made)
- Minutes of meetings (annual board, shareholder, and director meetings)
- Employment tax records
- Vital board decisions like property acquisition, policy changes, huge hires, or layoffs
- Stock exchange records
- Records of accounting
- Annual reports
- Human resource files
- Credit card and bank statements
- Financial records
As we mentioned, different corporations require different records. This list merely covers a few you might need to add to your corporate records. You might have to include more like documents from your secretary of state.
Who Should be in Charge of Record Keeping
Generally, the company secretary keeps the records in the organization. The individual is usually available at all or most meetings. There, they will take minutes, note attendance and actions taken, and give specific attention to critical resolutions.
Afterward, they will go ahead to distribute the minutes to critical members, including the lawyer, shareholders, and board of directors. They will also follow up on any necessary documentation like annual reports or agreed action points/resolutions.
While the secretary is tasked to keep and maintain the corporation records, others still have work to do. An example is any governing body within the company that’s in charge of compliance. This could be the legal operations team. Like the secretary, they have a responsibility to make sure that the records are kept and maintained.
How to Keep Corporate Records
The law requires you to keep corporate records, but it doesn’t state how you should keep them. Thus, you have a lot of flexibility and creativity to exercise in that area. Regardless of your chosen method, you should always keep your records organized, thorough, and well-protected.
Usually, corporation directors and secretaries keep them as hard-copy files in a physical location. Many people still choose to do this today. However, if you need to do so, you can go for a relatively more convenient electronic method. Either way, you must ensure that your corporation has backups.
Papers could be damaged by fire or water. Besides that, soft files could be damaged by viruses or lost to accidental deletion. You cannot afford to lose years of intricately kept resolutions and decisions.
Speaking of years, you should know that you don’t have to keep these records permanently. The duration of storage depends on the document itself. Your corporation tax returns, for example, don’t need to exist in your records longer than six years.
The IRS [1] has all the details on the duration required for maintaining company corporate records.
Where to Keep Corporate Records
Technically speaking, you can keep corporate records for your business almost anywhere. However, while keeping these records, you must remember a few reminders.
First, you want your records in a place that is easily accessible to the right people. Our team emphasizes the need to ensure that these documents are handed over to “the right people.”
Apart from that, you may want your records well-protected. If these files are in digital format, you should keep them on a computer with adequate virus protection. If your stock records, for example, are hard copies, you may want to keep them someplace safe. It should be free from hazards and accidents.
Interesting Read: Guide to Digital Transformation for Business
Importance of Good Corporate Record Keeping
We’ve already established that accurate corporate record-keeping protects your business and members from legal consequences. Beyond that, here’s why you need to keep and maintain your LLC/corporation records and documents:
- Its information acts as a corporate shield and maintains your limited liability and personal assets.
- Its documents show regulators that your entity/corporation is functioning as it should
- It provides evidence of important resolutions made meeting minutes.
- Its information serves as a record of past performance if you need to sell the LLC/corporation.
State Requirements
States requirements and rules for your business’ corporate record keeping vary. However, many states expect the following from you:
- Records should be in your company’s primary place of business.
- Records should be with your chosen registered agent service if you’re incorporated outside of your business states.
- Records must include two constitutional documents. These are the articles of incorporation and company bylaws. Of course, you’ll also include any new amendments in due time.
Most of the time, everything else is determined by the state you’re operating in. This includes financial details, an operating agreement for LLCs, names, and addresses of officers for LLCs, and stock exchange records.
If you are looking for formation services to assist in your business, here are our list of the best LLC formation services available today. Creating your business will be easier for you!
Conclusion
Keeping a corporate record is one of the important factors to the success of your business. It doesn’t just help your business remain compliant with state rules, it also helps you to protect yourself from dangerous loss of information. This could otherwise be detrimental to your financial health. Here, we’ve provided expert advice to help you understand how you can do proper corporate record keeping.
Are you planning to establish a non-profit organization? Well, before diving in to your decision, you should know the advantages and disadvantages of forming a non-profit organization. Read next!
