As we roll in to a new year it is a good time to be sure that all of your entity’s significant dates are on the 2018 calendar. Depending on your entity type and jurisdiction, you may have annual meeting dates and/or annual report dates to track. When you set up the 2018 calendar for your entity be sure that any reoccurring dates are scheduled and any planning deadlines are noted in advance. Depending on your entity’s organizational structure, you may need to complete some or all of these annual processes.
An annual meeting is an internal requirement that is documented as part of your company’s records. Depending on the laws of your entity’s home state and governing documents, it may be that annual meetings can be completed by written consent action instead of holding an in-person annual meeting with minutes.
Corporations have the strictest annual meeting requirements – both the stockholders and the directors are usually required to hold annual meetings. Limited liability companies (LLCs) are generally not required to hold annual meetings (member or manager, if the LLC is manager-managed). However, it is recommended that LLCs hold these annual meetings to document important decisions.
Annual stockholder or member meetings provide for the election of directors or managers and annual director or manager meetings provide for the election of company officers. Additionally, the Bylaws of a corporation or the Operating Agreement of an LLC may clearly define decisions that require director or manager approval. Those requirements should be followed, but it is also recommended that the following decisions be approved by resolution, ideally at the time of the action, but in any case be ratified as part of the annual meetings:
- adoption of new or changes to existing banking arrangements
- issuance of additional stock or membership interests
- qualification of the entity to do business in additional states
- entering into or terminating significant contracts
- entering into any contracts (including setting compensation) with directors, officers, stockholders, members, managers, or affiliated companies
- adoption of employee bonus or compensation plans
- changing the authority delegated to senior officers of the entity
- acquisitions or sales of significant entity assets
- engagement of accounting firms, law firms, other advisors
- significant capital expenditures
- settlement of litigation or disputes
- other transactions where long term documentation of the transaction (for historical or other reasons) is important
An annual report is an external requirement that is imposed by jurisdictions where your entity is organized and/or qualified to transact business. Generally, an annual report asks for basic entity details such as the business address, information regarding the management and/or ownership of the business, etc. A fee to accompany the annual filing is usually required as well.
Corporations are generally required to file annual (or biennial) reports with the Secretary of State of its home jurisdiction. LLCs generally have looser requirements, and depending on its home jurisdiction, may not have to file annual documentation. Corporations and LLCs that are qualified to do business in other jurisdictions should review the requirements of those states. These annual report due dates may be tied to the date of entity formation or qualification or they may be set by the state on one date for all entities. Failure to make these annual filings on time could result in loss of good standing and eventually the involuntary dissolution of your entity.
Consistently adhering to these annual meeting and annual report deadlines will reinforce the separateness of the entity from the individuals and help bolster any argument against piercing the corporate veil. So, pull out your paper planner or open your electronic calendar, and add these important annual meeting and annual report dates to your company’s calendar now!