One of the requirements for maintaining a corporation’s existence (and the liability protection that it affords) is that the shareholders and Board of Directors must meet at least annually. Although most people view this requirement as a necessary evil, it does not have to be a waste of time. An annual meeting, and the corresponding minutes generated, is an important tool to support your company’s tax positions. In the event of a tax audit, an IRS auditor is required to review the corporate minutes.
Besides the election of officers and directors, other actions include the directors approving bonuses, retirement plan contributions, and ratifying key actions taken by corporate officers during the year. The directors should also specifically approve any loans to shareholders to lessen the opportunity for the IRS to reclassify the loans as taxable dividends.
These are a few examples of why well-documented annual meetings can be an important part of a corporation’s tax records. We would be happy to be involved in your company’s annual meeting and to assist in making sure tax-effective minutes of the meeting are prepared.
See also “Budgeting Process – More Than Numbers“