In the United States, businesses must keep books that show their functions are within the guidelines stipulated by the IRS and state laws. These books are called corporate records books or company records books.
Partnerships and LLCs, which are technically not considered corporations, must also keep corporate books as they are vital to any growing business.
Corporate Records Book- Definition
What is a corporate records book? Corporate records are critical to ensure successful governance and compliance. In most organizations, the company secretary, governance and compliance team, or legal operations team maintains the corporate records to protect its reputation and operations.
Corporate records are the official log of a company’s actions and business decisions. These records should be kept together in a central place that is easy to access should regulators require an audit of the corporation.
Traditionally, the corporate records book was kept as a physical binder or book. However, more corporations have integrated their records with digital platforms and use cloud-based systems or local network servers.
As a general rule, always make copies of all important documents and mark them as copies. These copies should be kept with an attorney, digitally, or in a safe deposit box. In case of an emergency, these copies act as backups.
What Is Included in a Corporate Records Book?
The corporate records book has many documents, including:
- The Articles of Incorporation. Any amendments to this document must also be included and filed with the state. You must keep a copy of the original and record all changes.
- Corporate Bylaws. These are the guiding principles that govern the work of the board of directors. They may include corporate office duties, how the board should vote and set policies, and records about the annual meeting.
- Minutes of shareholder and director meetings
- Annual reports
- Stock register. This keeps track of stock ownership and transactions.
- Tax and corporate business resolutions
- Appointment resolutions
- Any Director conflict of interest decisions
- Loan resolutions to or by the corporation
- Stock dividend resolutions
- Employee benefits and employee retirement plan resolutions
- Bank account information
- Assumed name certificates.
As the organization grows, you may add other documents to the corporate records book, such as employment agreements, company resolutions, necessary company contracts, and updates on any changes in ownership shares or interests.
In addition to the above records, board resolutions are also included in the corporate records books. The work of the board is to approve overall resolutions and corporate policies. However, they are not involved with the day-to-day running of the business.
One of the board of directors’ key roles is to pass resolutions. These are documents that record their decisions on major policies. These resolutions may include the following:
- Records of major transactions
- Contract approvals
- Real property sale and purchase records
- Market expansion
- Mass hiring or layoffs
The above resolutions may also be included in the corporate records books.
Why Is It Important to Keep a Corporate Records Book?
As discussed earlier, corporate records are a requirement by the IRS and state laws. They act as proof that your organization is functioning within the Internal Revenue Service’s stipulated regulations.
When an entity is incorporated into a jurisdiction, it creates a corporate record. Most jurisdictions require their entities to hold documentation such as articles of association.
The entity is also required to hold regular board meetings and keep records and minutes.
These records prove that the entity is healthy, functional, and viable. All corporate records must be signed, and all actions must be backed by documentation.
These corporate records show that the corporation is a separate entity and shield its owners from liability. In case of corporate distress, creditors and lenders cannot go after the shareholders’ personal assets.
How Are Corporate Records Created?
The corporation’s board of directors generates corporate records, including documents such as articles of incorporation.
The board is also responsible for creating and editing motions and minutes made during board meetings which are also included in the corporate records.
Typically, a corporate secretary is tasked with keeping these records. The secretary also calls roll at board meetings taking note of the absent and present members.
They also keep track of stock ownership and any changes or transactions.
The legal operations team and the parties tasked with governance and compliance within the organization maintain the corporate records.
These records must strictly comply with local laws to protect the shareholders, board members, and the company.
Corporate Records Books Play a Critical Role in Your Organization
The corporate records book protects the company owners against creditors and lawsuits. Keeping accurate, updated records also shows that the company’s operations are within the law safeguarding the company against potential sanctions by the IRS and other regulatory authorities.
In addition to keeping updated records, organizations must also ensure that their corporate records books are stored safely and easily accessible in case of an audit.
Physical corporate records books are fast becoming obsolete with more organizations embracing technology. Secure, cloud-based storage is the number one choice for most companies.
As you form your corporate records books, check with your state to ensure you comply with all the stipulated guidelines for running your corporation.
Most states have specific regulations and tax laws. If you are unsure which regulations apply to your corporation, contact an attorney for a professional opinion.