As a business attorney, I have helped many clients with setting up new companies, usually corporations or limited liability companies (“LLCs”). It can be a fast and furious process. After the “entity formation phase” is complete, however, some business owners overlook the importance of “routine maintenance” for the company.
Obviously there are things that you have to do annually, like filing income taxes. One thing that frequently slips the mind of business owners is the annual report to be filed with the State of Michigan. Filing the annual report and paying the filing fee is required for all types of entities. If you don’t recall receiving an annual statement and sending your payment in to the State, that is probably an issue that you should address immediately (either directly or with an attorney’s assistance if the issue dates back several years). Ultimately, the State reserves the power to designate an LLC as “not in good standing” or “automatically dissolve” a corporation if annual reports are not filed for several years. So at a minimum, please take care to timely file your annual report and fee.
There are other “general maintenance” items that we also recommend attending to on an annual basis. Technically, LLCs are not required to hold annual meetings (corporations are required to hold them, although both shareholders and directions may carry out their functions solely by written consent in lieu of any meetings). Additionally, LLCs are also not technically required to document any meetings that are held or any transactions or important decisions carried out (corporations are required to document these items). However, as a member or manager of a LLC, it would be a rare case that the company can be run effectively without ever holding meetings or memorializing major events that occur over the course of time. So as a general rule, we recommend documenting important decisions and major transactions via resolutions. These simple tasks will serve as valuable records of past activity and ease issues that may arise in the event of a future audits, corporate reorganization, or buy/sell transaction.
Some of the typical items that should be considered for inclusion in a company’s resolutions are:
Corporations
Election of Directors and Officers
Compensation of Officers and Employees
Bonuses for Officers and Employees
Dividend Distributions
Review of Financial Statement
Review of Bylaws and Shareholder Agreement
Review of Lease(s)
Review of Insurance Policies/Employee Benefit Plans
Review of Changes re: Transfers/Redemptions of Shares
Memorialize Major Purchases, Loans, and Other Transactions
Limited Liability Companies (LLCs)
Review of Manager(s) (if manager-managed)
Review (and Election, if necessary) of Officers
Compensation of Officers
Compensation of Employees
Bonuses for Officers and Employees
Profit Distributions
Review of Financial Statement
Review of Operating Agreement
Review of Lease(s)
Review of Insurance Policies/Employee Benefit Plans
Review of Changes re: Transfers/Redemptions of Membership Interests
Memorialize Major Purchases, Loans, and Other Transactions
If you have a company and have not been holding annual meetings or documenting your major transactions and important decisions, or if you have any questions about other “routine maintenance” issues, please do not hesitate to contact me.
