When you hear about an annual shareholder meeting, what image comes to mind? A large meeting of power players at Amazon, Exxon or Apple? Or Jim, who runs a local landscaping business from his house?
Many small business owners opt to incorporate (either by forming a C Corporation or S Corporation) to help protect their personal assets. In addition, the lowered corporate tax rate makes the C Corporation an attractive option for businesses of all sizes. Whenever you form a C or S corporation, you must adhere to your state’s corporate administrative requirements – even if you’re just a party of one. These requirements include holding and documenting board and shareholder meetings.
Single Owner Corporations
In this article, we’ll answer some of the most common questions related to a single owner corporation and your corporate administrative requirements…
1. Can I Have a Single Shareholder Corporation?
Yes. All states allow a single shareholder to create and run a corporation. And all states allow it to have just one director as well. So you can be the sole shareholder, director and officer for your company.
2. What are the Administrative Meeting Requirements for a Single Shareholder Corporation?
All corporations need to hold an annual shareholder meeting and a board of directors meeting. You can have more if needed, but one per year is the minimum.
3. What should I Discuss in the Annual Shareholder Meeting?
The main purpose of the annual shareholder meeting is to elect the corporation’s board of directors for the next year. With larger companies, this can be a competitive and contentious vote. In your case, you can simply appoint yourself as the director. You’ll need to prepare meeting minutes that show you (as the shareholder) elected yourself as the sole director of the board.
4. What Should I Discuss in a Board Meeting?
A company’s board of directors typically makes major financial decisions that affect the company and its shareholders. These decisions include: issuing stock, approving loans or acquisitions, appointing officers, setting officers’ salaries, approving raises, and dividend declarations. For single owner corporations, the most common thing you’ll “discuss” and record are significant changes in your compensation and any dividend distributions.
5. How do I Document a Meeting?
You will need to create meeting minutes for both the board of directors meeting and annual shareholder meeting. Meeting minutes don’t need to include every little detail, but do need to document the key information and any decisions made. Typical meeting minutes include:
- The date, time and location of the meeting
- Who attended. Note: for a board of directors meeting where you’re the only one attending, you’ll need to document that you hold all three officer positions (CEO, CFO/treasurer and secretary) and are in attendance.
- Agenda items with a brief description of each item
- Voting actions – in the case of a single shareholder corporation and single director, you’ll just be documenting how you voted
- Time when the meeting was adjourned
You don’t have to create meeting minutes from scratch. You can find free templates online to serve as a starting point. By using a template, you can fulfill your administrative obligations in no time.
You don’t need to file your minutes with the state or anywhere else. Just keep them with your other corporate records, such as articles of incorporations, bylaws, and resolutions.
6. Do I Really Need to Bother with This?
When you’re a solo shareholder and director, it’s very easy to overlook corporate formalities. But skipping these requirements could put your liability protection at risk. To maintain your corporation’s status as a separate legal entity, you must engage in certain corporate formalities (like holding an annual shareholder meeting or filing your annual report). If someone tries to sue you, they may try to make the case that the corporation hasn’t met its corporate obligations and is really just an extension of you. If they’re successful in this argument, they can get a judgment against your personal assets in addition to the company’s resources.
So the moral of the story is you need to hold an annual shareholder meeting and an annual board of directors meeting, no matter how small your corporation is. As a single shareholder/owner, your meetings and decisions won’t be complicated. Be sure to take a few minutes to hold your meeting and document it. You’ll be protecting your corporation’s good standing and your limited liability status.
Image: Depositphotos.com