The law requires certain entities to keep records and to allow government agencies to inspect those records. These requirements apply to corporations, limited liability companies (LLCs), and limited partnerships (LPs).
Almost every state imposes recordkeeping requirements on corporations and LLCs. The length of time you have to keep your records depends on what type of business entity you are and how long it has been in existence.
Limited liability companies can be subject to extensive recordkeeping requirements.
LLCs are hybrid entity that combines the characteristics of corporations and partnerships. Like corporations, LLCs can be formed in any state, and their owners are protected from personal liability for the debts or obligations of the business.
Unlike corporations, however, LLCs do not have shareholders because all members have an equal interest in the profits earned by an LLC regardless of how much capital they put into the company or how much work they do for it.
Instead of having shareholders who vote on corporate policies and elect directors at annual meetings, members decide how to run their business through an operating agreement.
What records must be kept?
The following outline indicates the essential records that have to be kept safe and smartly history keeping in a corporation.
Formation documents
Articles of incorporation: This is the first document you’ll need to file with your state’s Secretary of State’s office.
It includes information about your corporation, including its name, address, and date it was created. You can find sample articles online or use our sample form as a guideline for creating your own.
Bylaws: These are rules that govern how a company operates internally. The board should review these periodically to ensure they still reflect current conditions in the business world; if not updated regularly, they may become obsolete over time!
Ownership records.
Corporate/LLC owners should also be sure they have records showing who they’ve appointed as directors/managers if they have chosen not to have any official officers listed on papers filed with state authorities.
These people will serve as your board members in charge when no one else can act on behalf of your company because they know its inner workings best–but only if no other eligible individuals are available.
Operating documents.
Operating documents include the articles of incorporation, bylaws, and any amendments. These documents may be in one copy or spread across multiple documents.
The best practice is keeping all your operating documents together in one place, making them easy to find when needed.
Suppose you have a dispute with someone else about the corporation or LLC. In that case, your operating documents must be written down somewhere so you can refer back to them if necessary during court proceedings.
Capital contribution documents.
Capital contribution documents are the records that show how much money each shareholder invested in the company. They’re usually a part of your operating agreement, but they can also be separate from it.
Capital contribution documents aren’t required to be filed with your state, but they may be helpful if you need proof of ownership or a guarantee that you have control over assets.
Records of actions taken.
If you are a corporation or LLC, you must keep records of actions taken by the corporation or LLC’s officers, directors, and shareholders. This includes minutes of meetings where important decisions were made.
Certain federal tax forms must be filed with the IRS each year if you are an officer, director, or shareholder of a business entity.
Tax and financial records
Federal and state tax returns. You must keep copies of all your corporate or LLC tax returns for at least three years after the due date of the return, or if there is no due date, for three years after the date it was filed with the IRS.
Payroll taxes and employment tax information. You must keep a copy of each employee’s W-2 form showing their salary or wages paid during each year they worked for you and any supporting schedules attached to the W-2s.
These documents must be kept until April 15th of the following year, when they were given out by employees, so that they can be used by them when preparing their income tax returns each year.
Requirements governing the inspection of records
All corporations and LLCs must keep books of account, minutes, and other records. The types of documents that must be supported depend on the type of entity you have formed.
Corporations will require the following: formation documents, Ownership records, Operating documents, LLCs: * Capital contribution documents.
Documentation of inspection requests
As a corporation or LLC, you must keep certain records for inspection by the IRS and be able to produce these documents when asked.
In addition, the IRS may inspect your books and records at any time during an audit or other examination procedure.
The following types of information must be kept in your corporate records; documents that show your organization’s formation and current status.
Minutes from board meetings where major decisions were made. These should include action items, and minutes from related committees, as appropriate.
Contents of request.
The request includes The date and time of your request, the name, and address of the person making the request, as well as their relationship with you. Also, include any other identifying information, such as an email address.
The name and address of the person receiving your request and any other identifying information that would help us get in touch with them if needed during our investigation process.
If someone has authorized another individual to act on their behalf–for example, if they’re too busy or unable to respond personally.
Documentation of compliance.
To maintain compliance, you must keep records for at least six years after the end of your fiscal year. The IRS recommends keeping these records as long as they are needed to prepare tax returns and carry out other legal obligations.
If you are required by state law or corporate/LLC bylaws to have minutes of directors’ meetings, those documents must be retained for three years after they’re prepared.
Conclusion
If you’re a corporation or LLC, keeping track of all your records is essential. They help you stay compliant with state law and can also be used as evidence if there are any disputes about your business or assets.
The most effective method of self-defense is ensuring that every document related to your company is up-to-date and accurate whenever possible.