Like most dental practices, the benefits of operating as a corporation stand out clearly, with tax savings and liability protection as two of the many reasons dentists form those entities. Even though most practitioners working as a corporation are also appointed president, they consider themselves dentists not presidents of a corporation. Nonetheless, as any qualified and experienced dental attorney would tell you, it is crucial that the practice function as any other normal corporation would and abide by the rules and regulations as they apply to such entities.
Consider the corporate shell as a veil that you stand behind; it is called the corporate veil and it protects owners and directors from personal liability. Corporate liabilities are not considered personal debts of the owner of the entity, meaning debt collectors cannot look to the personal assets of the corporate owner or director to satisfy a corporate debt. It is essential that your corporation performs the normal and regular duties of such a legal entity; by doing so, you can potentially avoid the possibility of having the veil of your corporation pierced, thus opening an avenue to demand payment of claims and collect debts from owners and directors of that corporation.
Fortunately for the owner of an incorporated business, the duties that confirm its status as a legal corporate entity, rather than a facade of your sole proprietorship practice, are few and simple to perform. One of the main duties of a corporation is to hold an annual meeting and keep minutes for that event. For full assurance that you are satisfying the legal requirements of a corporation, collaborating with a dental attorney is strongly urged, even when you believe you have a clear understanding of corporations and annual meeting minutes. This is one area where you do not want to err, since it could invalidate your corporate status if performed improperly.
Fortunately, the process of holding a corporate annual meeting is fairly straightforward. All corporations must hold an annual meeting of the shareholders, also referred to as an "annual shareholder meeting," "annual stockholder meeting," or "annual general meeting." The original corporate bylaws establish the time and location for such meetings, typically soon after the fiscal year end, and also defines the following:
The annual meeting is the opportunity to communicate relevant information and perform any activities necessary to the continued functioning of the corporate entity.
It is not uncommon for an annual shareholder meeting to accomplish the following:
Maintaining annual meeting minutes is the most important component of the annual shareholder meeting because this provides written documentation that a formal meeting was held and what issues were covered; this also demonstrates the business is indeed behaving as a corporation would. Also, keeping annual meeting minutes is required by most state laws (excepting Delaware, Kansas, Nevada, North Dakota, and Oklahoma); it should be noted that LLCs are not required by states to hold annual meetings, unless their operating agreement includes language making such events mandatory.
It is the duty of the Corporate Secretary to record discussions and decisions made during the meeting. Some of the information the Corporate Secretary will document are:
Once the annual meeting minutes are approved, they should be put in safekeeping with other relevant and important corporate documents, such as the Articles of Incorporation, Corporate Bylaws, and any corporate resolutions. While these minutes do not need to be filed with any state or federal agency, previous minutes should be retained for at least 7 years and should be available for review by members of the corporation, including shareholders, officers, and directors.
Protecting the corporate veil from being pierced serves two crucial purposes: The short and firm answer on whether you should draft minutes or not is an absolute yes!
1. Maintaining the Corporate Tax Rate - One of the biggest influences for electing to form and operate a corporate entity are the favorable tax benefits provided to corporate owners. Finally, many owners of corporations enjoy more flexibility in issuing salary and bonus payments to better accommodate their personal tax burden (such as holding the December salary until January to have a lower taxable income for the current year).
2. Preserve Personal Liability Protection for Shareholders - Saving taxes is great, but even better is knowing your personal assets, including cars, home, savings accounts, and retirement funds, are protected from possible loss through a lawsuit lodged against the corporation. Any person suing a sole owner of a corporation is dying to pierce that corporate veil so they can go after everything instead of only assets owned by the corporate entity.
It's recommended to get in the habit of keeping minutes of key events or activities of the corporation, including:
Please note that maintaining minutes serves to record business activities unrelated to normal dental practices, since dental offices are not normally entering into leases, changing locations, and hiring and firing associates. Consider the keeping of minutes as a particular need of the corporate body, outside the daily routines and services of a dental practice.
With this overview and primer on recording and maintaining annual meeting minutes, you are better equipped to ensure this important corporate duty is regularly performed.
However, we recognize that you are not in the business of running a corporation or keeping track of everything involved to keep it going smoothly. By looking to Dental and Medical Counsel for legal support, you can focus on what makes your corporation the success it is: your valuable skills and services. If you are in need of forming a corporation or filing your annual meeting minutes, contact us today!
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