By Attorney William W. Wirkus
In order to maintain its corporate liability protection, a corporation or LLC should always remain legally distinct from its owners and diligently follow corporate formalities. You have taken the first step in forming your business entity, but now you must properly maintain your business entity to continue to benefit from the protection it offers.
The following are some common questions regarding corporate formalities:
- Q: Should my Corporation hold annual meetings? Should my LLC hold annual meetings?
A: Wisconsin law requires that business corporations hold an annual meeting of the shareholders at least once per year. Among other agenda items, the shareholders would elect the board of directors. Corporate minutes should be taken of the meeting and kept in the corporate records. We also recommend that the board of directors meet at least annually, and among a long list of other agenda items, elect the corporation’s officers.
LLCs, on the other hand, are not strictly required to hold annual meetings under Wisconsin, but they can be worthwhile, nonetheless. Meetings can facilitate discussion among the members (owners) and provide a clear record of the LLC’s acts and decisions in the event of a dispute or audit. Be sure to consult your corporate or LLC bylaws, as the bylaws may have stricter meeting requirements than the Wisconsin statutes.
One of our corporate attorneys at Walden, Neitzke & Kuhary, S.C. would be happy to assist you in preparing an agenda for and holding your annual meetings and in preparation of your corporate minutes.
- Q: Can’t our corporation or LLC simply conduct all business through consent resolution?
A: Under certain circumstances consent resolutions are permitted in order for shareholders, directors, or members to take action, but generally such resolutions are required to be unanimous. However, use of consent resolutions does not negate the need for corporations to meet at least annually. Consult with an experienced corporate lawyer to determine what is required under the statutes and your bylaws in order to act through consent resolution.
- Q: What are the notice and quorum requirements for holding a meeting?
A: In Wisconsin, adequate notice of the date, time, and place of any meeting is generally required for any meeting of shareholders, directors, or members, with generally a minimum of ten (10) days’ notice required. A quorum of the majority of shares or membership units entitled to vote or a majority of directors is generally required for conduct of business at meetings. However, such notice and quorum requirements may differ significantly, depending on what the bylaws of the corporation or LLC may require.
- Q: Can we amend our corporation’s or LLC’s bylaws?
A: Typically the Wisconsin statutes and bylaws allow for bylaws to be amended. Consult with an experienced corporate lawyer to discuss the requirements for properly amending your bylaws.
- Q: Does my business need a separate bank account.
A: Yes! In order to keep a corporation or LLC legally distinct from its owners, a separate business bank account is needed. Further, the owners cannot treat the business’ bank account as their personal piggy bank. Corporate funds should only be used for legitimate business expenses such as rent, payroll, utilities, and office equipment. To determine what is and is not an appropriate use of corporate or LLC funds, please consult with your accountant and an experience corporate lawyer.
Contact Walden, Neitzke & Kuhary, S.C. today for a corporate lawyer free consultation to discuss your corporation or small business needs.