There are a wide variety of corporations across the country, but what do all of those corporations have in common? In a word: paperwork.
There are dozens of forms that each corporation needs to fill out and keep on file for several years: tax forms, annual reports, the business ledger, and more.
Keeping these corporate records can be tedious, but it’s absolutely necessary if you want to operate a compliant business. You won’t want to overlook this crucial component of running a corporation.
In this guide, we’ll cover what corporate records are, why you should keep them, what documents you should include in your records, and how to keep those records.
Rocket Tip: Haven’t incorporated a business yet but you’re ready to get started? There are a handful of company incorporation services that can launch your business and register with the state.
What Are Corporate Records?
Corporate records are vital documents about your business. For example, your articles of incorporation are included in your records — in fact, this document is one of the first records you’ll create. Other documents in the record include your bylaws, business ledgers, tax returns, meeting minutes, and more.
All corporations are required by law to maintain a detailed corporate record, and neglecting your record could have rather serious legal repercussions.
Why Do I Need to Keep Records?
In addition to being legally required, keeping corporate records has practical value for your business. For example, your records help you track your corporation’s progress over the years, and your tax returns from previous years will help you complete future tax returns.
Corporate records also maintain what is commonly called the “corporate veil,” which is the division between the corporation’s assets and the personal assets of the corporation’s members.
These records prove that your business is compliant, and without that compliance, your personal assets could be in jeopardy. Essentially, proper records protect you and your business during any lawsuits and audits.
Finally, good records could increase the value of your company by proving your corporation’s worth. If you ever wish to sell your business, the buyer will want to see your records to back up the “sticker price” you set.
What Should My Corporate Records Contain?
The records kept by a business vary. Some have a lot of tax records, while others may only have the bare minimum. One corporation will have a board that meets frequently, and the board of another company will have only one meeting a year.
That said, there are a lot of documents that all corporations will need to include in their records, although the exact requirements can vary a bit depending on your state, as well as the industry you operate in. In general though, here are several of the things you should include:
- Your articles of incorporation (and any amendments to them)
- A copy of your corporate bylaws
- Minutes from board meetings and annual shareholder meetings
- Income tax returns (and proof documents for any deductions you make)
- Employment tax records
- A record of your resolutions (major decisions made by the board), including property acquisition, changes in policy, and large batches of layoffs or hires
- Copies of your annual reports
- Records of stock exchanges (and other securities)
- Accounting records
- Bank statements and credit card statements
- Human resources files (hires, terminations, applicants, etc)
Please note that this is not a comprehensive list. There may be other items you need to include, and it’s also possible that your specific corporation may not need to keep every single record listed above.
If in doubt, ask yourself if the document is a record that could be requested in an audit, or used as evidence in a lawsuit. If so, you should keep it.
How Do I Keep My Records?
While the law dictates that you keep records, it does not explicitly say how to keep them, so you have the liberty to choose your method for record-keeping. Whatever method you choose, you should ensure that your records will be organized, thorough, and protected.
Traditionally, corporate records have been kept as printed, hard-copy files in a physical kit. Some corporations still use this method, but many opt for more environmentally friendly electronic files. With either method, your records should be backed up in case of loss, because paper files would be susceptible to fire and water damage, and online files could get deleted or lost on accident.
Records are created by several members of the corporation. The board of directors create bylaws, resolutions, and annual reports. The corporate secretary creates the minutes during each board meeting.
Accountants at the corporation are often tasked with creating and maintaining financial records, tax returns, bank statements, and other financial documents. All of these documents, once created, need to be maintained in your corporate records.
These records do not have to be kept permanently, however. (Imagine how big the records would be for century-old corporations!) The length of time you need to keep a record depends on the document in question. For example, tax returns usually need to be kept for six years.
For more information on how long to keep documents and other essentials of record-keeping, you can consult the IRS’s publication, Starting a Business and Keeping Records.
Do I Need to File My Records With the State?
There is no filing requirement for your corporate records. Corporate law requires you to maintain the records, but you do not need to file them with the IRS or your Secretary of State. If you have documents that you’re unsure about, you may want to consult a business attorney for further guidance.
Corporate record-keeping can be confusing and difficult, even if you operate a small company. The biggest challenge with record-keeping is simply making sure you have all the documents you need. After all, if you’re ever audited, or if your business is sued, you could be in serious trouble if you don’t have all the necessary forms.
If the extensive record-keeping requirements of a corporation sound too daunting, perhaps forming a limited liability company (LLC) would be a better choice for your business, as this entity type requires far fewer records to be kept.
Rocket Tip: Haven’t incorporated a business yet but you’re ready to get started? There are a handful of company incorporation services that can launch your business and register with the state. LegalZoom and ZenBusiness are two common choices for entrepreneurs.