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Every year around tax time, we like to remind our clients to review their corporate books. It is a good time to update the books for the events of the last year. Or even longer, if it has been awhile.
Corporate books may be paper books, digital, or both. The important thing to know is that keeping them up-to-date is well worth the time.
Current corporate books are evidence that you are operating in the manner required by law. Your well-documented corporate books may come in handy if you have an audit by the IRS, are involved in a lawsuit, or need to show proof of compliance to the Secretary of State or other administrative body.
Texas law specifically allows corporate meetings to be done virtually. However, if you have older documents of incorporation, there may be language requiring meetings to be held in person. During Covid-19, state and local orders which say that certain gatherings in person are not permitted may make in person meetings impossible. Nonetheless, meetings should still be held in a timely manner when at all possible, in a manner that is law abiding.
In planning for your corporate meeting, you will want to consider all of the important events that have happened since the last meeting. Has your corporation signed a new lease? Bought property? Are the officers changing? Important changes should be documented, voted on, and ratified by resolution. The important documents should be kept in a readily available, organized place. Copies can be included with the corporate book.
If you have had Directors or Officers leave your corporation, that should be documented. If percentages of ownership have changed, that fact needs to be documented. If your corporation’s “purpose” has changed since the Articles of Incorporation were filed, you should resolve that issue as soon as possible. A business lawyer can answer legal questions for you on this subject and your C.P.A. can answer any tax concerns you have.
For non-profits, compliance is especially important in order to keep tax-exempt status.
Updates in the Articles of Incorporation need to be filed with the Texas Secretary of State, Corporations Division. You can find more information about this on the Texas Secretary of State Business Corporations site, or a Texas business attorney can help you.
While you are at it, review your current by-laws and procedures. If they are not up to date with technology, why not do that now? You can specifically allow virtual meetings, electronic communication, storage and retrieval, etc.
Virtual meeting platforms now allow screen sharing and electronic polls and voting. Once it is set up, you’ll be amazed at easy it is!
If you need help updating your corporate books, (or are considering forming or dissolving a corporation) contact an experienced Texas Business lawyer to help.