Examples:

• • Acme Inc. holds its annual shareholder meeting every May 1st, sending notice 30 days in advance per its bylaws.
  • A special shareholder meeting was called in August when Acme needed approval to purchase an expensive new piece of equipment.
  • With 60% of shareholders required for a quorum, Acme had to reschedule its annual meeting when only 40% showed up.
  • Acme’s board of directors convenes every quarter to evaluate financial statements and make critical business decisions
  • After its annual meeting, Acme’s directors held an organizational meeting to elect officers and adopt resolutions.

How to Proceed:

• • Docket your annual shareholder meeting date well in advance and send proper notice to all owners.
  • Prepare a detailed agenda outlining the topics and proposals to be discussed at each shareholder or board meeting.
  • Verify quorum requirements in your bylaws and track RSVPs to ensure sufficient attendance.
  • Hold board of directors’ meetings directly after the annual meeting and quarterly or as needed throughout the year.
  • Don’t neglect to call special meetings to get shareholder approval for any major corporate changes or transactions.

FAQs:

• • Can we hold our annual meeting virtually or by phone? Yes, as long as all shareholders can hear each other, meetings can be held electronically. Check your state law for any restrictions.
  • What if something comes up and we can’t hold our annual meeting as scheduled? Promptly send notice to all shareholders that the meeting is adjourned to X new date. Don’t just skip it entirely.
  • Can shareholders vote by proxy if they can’t attend a meeting? Yes, if your bylaws allow it. Send proxy forms with the meeting notice and voting agenda items.
  • What are the consequences of not holding an annual meeting? You could lose your S corporation status and liability protection. If it’s been neglected, hold an annual meeting ASAP and ratify past actions.
  • How many directors does an S corp need? S corps must have at least one director, but most have three to five.

Examples:

• • Acme keeps its corporate records in a secure online portal, backed up regularly and accessible to all shareholders.
  • The secretary prepares minutes from each board and shareholder meeting, circulating a draft for approval within 5 business days.
  • When Acme issued 10,000 shares to a new investor, it recorded the sale and stock certificate numbers in its stock ledger.
  • Acme’s shareholders signed a unanimous written consent electing a new director and ratified it at the next annual meeting.
  • The board keeps copies of all Acme’s contracts, leases and loan agreements in the corporate minute book, noting their approval in resolutions.

How to Proceed:

• • Create a secure, central location for all your important corporate records, accessible by all directors and shareholders.
  • Designate a secretary or use meeting management software to take roll call and prepare minutes at each meeting.
  • Include the minutes from the prior meeting for approval and all resolutions adopted in your corporate record book.
  • Issue physical or electronic stock certificates and record each in your stock ledger, along with any transfers.
  • Have all shareholders sign any stock purchase agreements, voting trusts, or buy-sell agreements and keep them with your corporate records.

FAQs:

• • What is the required retention period for company records? Most states require keeping minutes, resolutions, stock records and related documents for at least 7 years, if not permanently.
  • What should be included in meeting minutes? Minutes should reflect the date, attendees, agenda items, discussions held, actions taken and votes recorded. Attach any resolutions passed.
  • Can we just keep electronic records or do we need physical copies? Electronic records are generally acceptable if secure and accessible. Keep signed copies of key docs like bylaws and shareholder agreements.
  • What happens if we forget to prepare minutes for a meeting? Draft them as soon as you remember, noting the date prepared versus the meeting date, and have the board ratify them at the next meeting.
  • Who should have access to our corporate records? Legally, all directors and shareholders must be allowed to inspect certain corporate records. Use secure role-based access.

Examples:

• • Acme Inc. maintains separate checking, savings, credit card and merchant accounts from its shareholders’ personal ones.
  • When a client writes a check to Acme, it’s deposited in the corporate account. The company credit card is used for all business purchases.
  • The founder loaned Acme $10,000 to buy equipment, documented with a promissory note. Acme makes monthly P&I payments to her.
  • Acme’s full-time shareholder employees receive regular salaries, reported on W-2s, not 1099s. Distributions are separate.
  • Shareholders reimburse Acme via check for any approved personal expenses paid by the company card or account.

How to Proceed:

• • Open separate bank accounts for your S corp using the company name and EIN. Never mix personal and corporate funds.
  • Deposit all S corp income into the corporate accounts. Pay all legitimate business expenses from company funds, not personal.
  • Document any money you put into the S corp as either a capital contribution (equity) or shareholder loan (liability) with proper paperwork.
  • Pay active shareholder-employees reasonable salaries, properly reporting amounts on W-2s and withholding payroll taxes.
  • Establish an accountable plan for any personal expenses paid by the company, requiring timely employee reporting and reimbursement.

FAQs:

• • Can I use my S corp bank account for personal expenses? No – that would be commingling funds and pierce the corporate veil. Keep separate accounts.
  • What’s the best way to put money into my S corp? Either contribute capital, which increases your equity basis, or loan the company money with a written promissory note.
  • How much salary should shareholder-employees take? The IRS mandates reasonable pay for services rendered. Avoid paying too little to minimize payroll taxes.
  • Can I just take cash withdrawals from my S corp? No – that looks like personal piggy bank abuse. Always properly document payments as salary, distributions, or expense reimbursements.
  • Can the S corp pay some of my personal living expenses? Only if they are legitimate business expenses. The IRS may re-characterize personal expenses as taxable compensation.

Examples:

• • Acme Inc.’s marketing agreement was signed: ACME INC. By: John Smith, President. Not just “John Smith” alone.
  • When signing a new lease, Acme’s signature block read: ACME INC., a California Corporation, By: Jane Doe, Secretary.
  • Before Sue signed a big client contract for Acme, she made sure the board reviewed and approved it as reflected in the meeting minutes.
  • Acme’s bank required Joe to personally guarantee the company credit line, putting his individual assets at risk.
  • Acme keeps electronic copies of all signed agreements in its corporate Dropbox and original hard copies in a secure file cabinet.

How to Proceed:

• • Ensure every contract, order form, invoice, agreement, etc. conspicuously bears the S corp’s complete legal name.
  • For corporate signatures, clearly identify the company name, signer’s name, and their official title (President, VP, Treasurer, etc.).
  • Adopt a policy requiring board approval for contracts over $X and maintain minutes or unanimous consents documenting authorization.
  • Try to limit personal guarantees. If required, consider using a separate entity to shield your personal assets.
  • Implement secure cloud storage and physical filing systems for executed corporate documents. Retain key contracts permanently.

FAQs:

• • What if I accidentally sign a contract in my own name instead of the S corp’s? You may be personally liable. Amend the signature if caught in time or insist future documents are correctly signed.
  • How should corporate titles be reflected in signature blocks? List the signer’s formal officer title per the bylaws and minutes – President, Vice President, Secretary, Treasurer, etc.
  • Can I sign an important contract without getting board approval? Not advisable, as that could be grounds for piercing the corporate veil. Follow protocol per bylaws.
  • Will signing a personal guarantee affect my S corp election? No, but it subjects your individual assets to liability for that obligation, so avoid if possible.
  • What corporate documents should we keep in our records? At a minimum, articles, bylaws, EIN, minutes, resolutions, stock ledger, important contracts, and tax returns.

Questions: S Corp Meetings & Records

• • 1. How often must an S corporation hold shareholder meetings?
    • A) Monthly
    • B) Quarterly
    • C) Annually
    • D) Every 5 years
  • 2. What is the minimum notice shareholders must receive before meetings?
    • A) 10 days
    • B) 30 days
    • C) 45 days
    • D) Varies by state statute and bylaws
  • 3. What is the purpose of a shareholder meeting quorum?
    • A) Block voting on resolutions
    • B) Ensure enough shareholders are present to conduct business
    • C) Meet virtually rather than in person
    • D) Approve all director decisions
  • 4. How quickly should meeting minutes be prepared and approved?
    • A) Within 30 days of the meeting
    • B) Within 1 week of the meeting
    • C) Before the next board meeting
    • D) Within 1 year
  • 5. What information should be included in the corporate minute book?
    • A) Articles, bylaws, EIN
    • B) Meeting minutes & resolutions
    • C) Stock certificates & ledger
    • D) All of the above

Questions: Financial & Signing Practices

• • 1. Which of the following is OK to pay with an S corp bank account?
    • A) Corporate expenses
    • B) Personal expenses
    • C) Shareholder wages & distributions
    • D) A and C only
  • 2. How should an S corp shareholder document money put into the company?
    • A) Capital contribution
    • B) Shareholder loan
    • C) Personal withdrawal
    • D) A or B
  • 3. What standard applies to S corp shareholder-employee salaries?
    • A) Reasonable compensation for duties
    • B) Below market rates to save taxes
    • C) Same as all other employees
    • D) Pegged to shareholder loan amounts
  • 4. How should S corp officers sign important contracts?
    • A) Using just their own name
    • B) By the company name alone
    • C) Company name, by individual name & title
    • D) Using the shareholder name & ownership %
  • 5. What should an S corp President get before signing a major agreement?
    • A) Approval from their spouse
    • B) Shareholder consent for any spending
    • C) Board authorization per the bylaws
    • D) Permission from the IRS

Answers: Financial & Signing Practices

• • 1. D) S corp funds should only be used for business expenses and paying shareholders, not personal spending.
  • 2. D) Shareholder investments should be classified as equity (capital contributions) or loans, with documentation.
  • 3. A) The IRS requires active S corp shareholders be paid reasonable salaries before taking other distributions.
  • 4. C) Corporate contracts should clearly show the S corp name, along with the signer’s name and title.
  • 5. C) S corp officers typically need board authorization per the bylaws to bind the company to major obligations.

Disclaimer

The legal information in this article discussing S corporation formalities and compliance is for general educational purposes only. S corp laws and requirements vary by state and circumstance. For guidance on maintaining your specific S corporation properly, please consult an attorney and tax adviser licensed in your jurisdiction. Most offer initial consultations to assess your company’s compliance and make personalized recommendations.