The tax and liability benefits of incorporating your business are balanced out by greater legal requirements. You have to run your business according to state and federal requirements for corporate behavior. One requirement is that you hold an annual meeting for shareholders, even if you're the only owner. You also have to keep minutes recording what happened at the meeting.
Keep It Simple
Keeping minutes of the meeting is a legal requirement, but it's also useful. Minutes prove you've met the requirements for a legal meeting and provide a record of decisions, votes and actions taken. You don't have to include every last detail: what counts is the outcome of a vote, not every point of the debate. You do have to get all the facts right. Once the minutes are typed up, everyone who was present should be asked to sign off on their accuracy. This protects the company if someone disputes a decision later. Keep the language plain and formal, so that there's no question how to interpret the minutes.
An S corporation, even a one-person company, has to have bylaws. The bylaws set the date for the annual shareholders meeting, but you still have to notify shareholders in advance. Notification includes the date, time and place, and a list of any actions you want to take and any candidates for board positions. When you file the minutes, include a copy of the notification notice. If anyone was notified late, ask her to sign a waiver of notification. Attach that to the minutes, too.
Your minutes should list everyone who attended the meeting -- all the shareholders and every director. If your bylaws set a quorum -- a minimum number of attendees -- the listing shows you met the quorum so the votes taken were legally binding. If the bylaws don't set a quorum, state rules kick in. The rules may be just that you have a majority of voting shareholders present, or a set portion -- one-third of them in Delaware, for example -- or your state may not set a minimum. If you're the only owner, 100 percent of the shareholders are always present.
A typical annual meeting includes a report on corporate finances and a vote for the board of directors. The minutes should include the list of candidates, and the votes each candidate received. If the S corporation wants shareholder decisions on other issues, the minutes should state the issue and tally the votes. All the annual minutes should be stored in a file or "minute book" so that you have the references available if anyone raises questions about how the meetings were conducted.
A graduate of Oberlin College, Fraser Sherman began writing in 1981. Since then he's researched and written newspaper and magazine stories on city government, court cases, business, real estate and finance, the uses of new technologies and film history. Sherman has worked for more than a decade as a newspaper reporter, and his magazine articles have been published in "Newsweek," "Air & Space," "Backpacker" and "Boys' Life." Sherman is also the author of three film reference books, with a fourth currently under way.