Corporate records are those records a U.S. corporation needs to keep to show that it is functioning in the manner required by the Internal Revenue Service and the laws of the state in which the business is incorporated (formed as a corporate business entity).
What Is Corporate Records Book?
Some corporations have a corporate records "book," which includes all the required documents. In other cases, the corporate records are kept online or in a file cabinet. The records should be in one place and available if the Internal Revenue Service audits your corporation.
You can also keep your corporate records "in the cloud," but these records may include confidential information and proprietary processes, so be sure your server is secure. Susan Ward, Small Business-Canada Expert, has a great article about document management that may help you with this project.
Why Corporate Records Are Necessary
Corporate records are needed to show that the corporation is functioning appropriately as required by the Internal Revenue Service, to show that the corporation is a separate entity and to maintain the corporate shield from liability.
How They Are Created
Corporate records are generated by the board of directors of your corporation. The board creates documents such as your corporation's articles of incorporation and annual reports. The board also creates and edits documents such as motions and minutes during board meetings.
The corporate secretary is usually designated to keep all of the corporate records. Of course, all records must be signed, and any actions taken must have documentation. If the corporation has shares of stock, the corporate secretary (usually the office of this individual) keeps track of stock ownership records. The corporate secretary also calls roll at each board meeting, noting which board members are present and absent.
Corporate boards approve overall policies and resolutions (decisions), and they don't get involved in the day-to-day decision making of the business. One of the most important activities of a corporate board is to make resolutions. Resolutions are documents that record board decisions. Corporate resolutions can be made on many matters, including:
- Records of major transactions of the corporation
- Approvals of contracts
- Records of sale or purchase of real property (land and buildings)
- Hiring or layoffs of large numbers of employees
- Expanding into a new market or a new location
All of these decisions, and more must be recorded.
What Other Records Should Be Included
- Your Articles of Incorporation and any articles amending this document. These articles are filed with your state, but you still need a copy of the original and all changes.
- Corporate Bylaws. The bylaws are the guiding principles governing the work of the corporation board of directors. The bylaws include corporate officer duties, information about the annual meeting, and how the board sets policy and votes.
- Minutes of all shareholder and director meetings, including the annual meeting
- Annual reports
- A stock register for keeping track of stock transactions and stock ownership.
- Corporate business and tax resolutions
- Hiring and appointment resolutions
- Director Conflict of Interest resolutions
- Resolutions for loans to and by the corporation
- Resolutions regarding employee benefits and retirement plans
- Stock dividend resolutions
Forming Your Board and Keeping Records
As you form your corporation, you will need to check with your state to make sure you are following state guidelines for organizing and running your corporation. All states have specific regulations governing corporations. Check with your state's secretary of state or with your attorney for more information.