Most small business owners believe corporate business record keeping is just for big corporations. In our experience as Corporate Business Solutions consultants, most small business managers and executives consider record keeping to be just another administrative hassle that their work schedules can do without. But we strongly advise all small businesses to do better to keep corporate business records for a number of reasons.
If your small business is legally considered an S corporation, an LLC, or a C corporation, it is a must. Even small businesses that are not registered in this manner can benefit from keeping corporate-style business records.
Business Records Offer Legal Protection – The main reason corporations go to painstaking lengths to keep business records is for legal protection. Lawyers call this the “corporate veil” of protection in court. If your business is sued by anyone, including creditors, these business records will play an important role in showing that your company followed proper procedures and maintained legally required standards.
Safeguard Limited Liability – If a company is an LLC, corporate records are necessary to protect the “limited liability” function in the record. A potential lawsuit could demand personal assets in a settlement, all the while questioning the LLC’s compliance. Corporate records will safeguard your business’s LLC status.
For IRS Purposes – Corporate records can be requested by the IRS. If that happens, your business will need to provide it. IRS can demand documents like business meeting minutes under certain circumstances. Therefore, for tax purposes, these records are important.
In Case of a Sale – If the small business needs to go up for sale, a potential buyer would want to look at corporate business records to see how the business has performed. Also, they might want to make sure the company kept clean records and there’s nothing shady underneath.
For the above reasons and then some, CBS Corporate Business Solutions consultants recommend small businesses keep records of events like business meetings, annual reports, shareholder decision-making documentation, among others.