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Hold Regular Meetings

#6 in Lee’s formalities checklist asks “Are you holding your annual meetings?”

#7 asks “Have you given proper notice (and kept copies) of the Meeting of the Managers?”

#8 follows up with “Have you kept proper and adequate minutes for the annual Meeting of the Managers?”

Whether or not you are the only owner, you should hold meetings for your company. Any real company will send out notice of its annual meeting, actually hold it, and have minutes taken to document it.  Holding the meetings and following all the formalities is essential to show a court that you were treating your company like a company and not just your alter ego.

One of the sections in your operating agreement should be a description of how often your company will hold meetings and the procedures necessary to conduct the meeting.  It should state:

  • how long before the meeting notice should be given
  • how notice of the meeting will be served
  • who should attend the meeting
  • what percentage of attendees are required to constitute a quorum able to vote on company business
  • what happens if a quorum doesn’t show up to the meeting (There are three owners and only one shows.  Should that one be allowed to make decisions that will affect the whole company?)

At a minimum, you should hold an annual meeting to go over what has happened over the past year and then plan for the next year.  Depending on the needs of your company, you could mandate quarterly, monthly, or even weekly meetings of the owners and/or managers.  All of this should be written down in your operating agreement or bylaws.

Once your basic company-wide meetings are spelled out in the operating agreement (or bylaws, if you are a corporation), make sure you play by the rules and hold those meetings as proscribed. Document that you notice them ahead of time (or have attendees fill out a waiver of notice beforehand). Hold the meeting–you can even use it as an excuse to have a good dinner and write off at least part of the expense as a business expense.  Discuss company business, and take minutes that the secretary/manager of the company signs and then files in the corporate/LLC minute book.

Taking minutes is an art form.

The first time I took minutes in a corporate meeting, I sent them off to an old attorney friend for approval. The guy chewed me out, saying I had done them all wrong and exposed the C corporation to big liabilities. Taking minutes is not hard.  The problem is, you can’t afford to pay the lawyer to do it for you, and nobody ever teaches you how to do it. But it’s so important to do it right.

Remember, your minutes are basically public information.  No, they aren’t officially filed anywhere with the government, but if there is ever a lawsuit or problem, one of the first things the opposing counsel will ask for is your minutes.

The opposing counsel will first want to make sure you are following the rules outlined in your operating agreement or bylaws.  If you don’t follow the rules, obviously you didn’t treat the company as a real company, so the courts won’t have to treat it as a real company either.

The opposing counsel will next be looking for damning information in your minutes. So what you write down is very important. (I go through how to write minutes appropriately in detail in my LLC Advanced and LLC Wizard packages.)

Both LLC and corporate entities require maintenance, including the requirement that you hold company and corporate meetings and keep minutes. All business resolutions need to be documented. Elections of officers, the appointment of managers, and all of the other management issues in your company should be addressed in your operating agreement or bylaws.  One of the ways you show the courts that you have treated the company properly is by keeping good minutes.

Your company may be “all in the family,” and it may seem like a hassle to formally call a meeting and hold it.  But if you want the courts to treat the company as a separate entity instead of your alter ego, then you had better treat it as a separate entity.  Otherwise, the courts will pierce your corporate veil protection and you will become personally liable for your company’s issues.

  1. Hello!

    If you are the owner, CEO, manager, secretary, chief cook and bottle washer for your LLC would it be more convincing to have hand-written notes or should they be typed up? When taking minutes, is there a specific format? If so, is there a website that I may research where I can actually see a copy of professionally done minutes for an LLC meeting?

    I’ve been told that I need to have two separate LLC’s when fixing and flipping real estate (one LLC) and a separate one for fixing up and renting or offering a lease to own? Since I don’t really know the people I bump elbows with at CTREIA meetings yet, I can’t ass-u-me that they are necessarily providing me with the best or most accurate advice – despite their best intentions. Would you advise a new real estate investor to do have 2 separate companies? (I don’t remember you covering this in the multi-CD package I purchased after your presentations this past January in Florida at Ted Turner’s boot camp.)

    Last question. Can I ass-u-me then that if I have two separate LLC’s that I need to carry out all the same processes to protect each company, i.e. appointing managers, holding annual meetings, taking minutes,…? Boy, that would be a royal P.I.T.A. but I guess not as much so as being sued and not being protected…

    Thank you for all that you do to help the “average Joe” make a living, increase their knowledge of the legal aspects of owning a business, and sometimes just plain enlightening us to protect us from ourselves…

    P.S. Oops, one last thing. Do you offer any educational programs to help clarify when to purchase property in an LLC vs in a self-directed IRA? gg

    • Gayle,
      In answer to the questions you asked in each paragraph,
      1) It does not matter what form your minutes take as long as you are taking them. We will send you with an example form that shows how you can take minutes during a meeting. This form will be included in my update of the Business Planning section of the Accumulation and Preservation of Wealth Set. My Advanced and LLC Wizard Packages include both the form and an in-depth audio explanation of how to appropriately take and record minutes in your meetings.
      2) It all depends on how comfortable you are with running two separate LLC’s. We do recommend that you use two LLC’s, one for the real estate you are holding, and one for the real estate you are flipping.
      3) If you have separate LLC’s, you will need separate minutes, accounts, operating agreements, etc. Each time you do any business or carry out a transaction, you will need to be clear which company you are acting for. If you think it is going to be too complicated to run two, then it is better to just have one. Two badly run LLC’s provide less asset protection than one well-run LLC.

  2. I cant find your 27 point formalities checklist

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