The Importance of Meeting Minutes for Business Owners
Business owners frequently neglect the task of recording meeting minutes. This avoidance often stems from the misconception that it is a time-consuming process. However, creating meeting minutes can be straightforward and takes just a few minutes. Understanding its significance can encourage owners to integrate this simple practice into their routine.
Legal Implications: A Case Study
Consider a scenario where a business was sued, and the owner faced personal liability for a breach of contract. Despite the owner having no direct involvement in the conduct that led to the lawsuit, the claim suggested otherwise. This situation involved a Limited Liability Company (LLC), designed to limit the owner’s liability. The aggressive party in the lawsuit sought to prove that the LLC did not follow standard formalities, such as keeping regular meeting minutes.
The Role of Meeting Minutes in Legal Protection
Maintaining meeting minutes is critical even in an LLC owned and operated by a single person. The lawsuit claimed that the lack of meeting minutes indicated that the owner did not treat the LLC as separate from their personal finances. Consequently, they argued that the corporate veil should be pierced, making the owner personally liable.
Courts generally require business owners to adhere to formalities, such as recording meeting minutes, to uphold the LLC’s limited liability protection. While it’s rare for a court to hold an owner personally liable solely for missing meeting minutes, it can be a contributing factor among other failures to separate personal and business activities.
Simple Steps to Create Meeting Minutes
To prevent potential legal challenges, business owners should regularly document meeting minutes. This can be done using AI tools like ChatGPT or a word-processing document. Here are the basic elements to include:
- Meeting Title: Depending on the business structure, title the document appropriately, such as “Shareholder Meeting Minutes,” “Board of Directors Meeting Minutes,” “LLC Members Meeting Minutes,” or “LLC Board of Governors Meeting Minutes.”
- Company Name and Meeting Date: Clearly state the company name and the date of the meeting.
- Attendees: List the names of all attendees. For a single-owner LLC, this will often be just the owner.
- Discussion Items: Briefly note the topics discussed, such as financial reviews or operational updates.
- Decisions Made: Record any decisions or resolutions passed during the meeting.
- Adjournment: Note the conclusion of the meeting and optionally, the time.
- Signatures: The minutes should be signed by the president or secretary of the company, which in a small business is typically the owner. The owner should sign in their capacity as the secretary to distinguish from their role as the owner.
The Benefit of Regular Meeting Minutes
Incorporating this simple practice can significantly strengthen the legal standing of a business. By regularly documenting meeting minutes, owners can help protect themselves from personal liability for business debts and legal claims. It is a small investment of time that can have substantial benefits in maintaining the corporate veil and ensuring the business is seen as a separate legal entity.
Business owners can use templates and examples available online or create their own to fit the specific needs of their organization. The key is consistency and ensuring that all essential elements are included in each set of meeting minutes.
Video Transcript
Meeting minutes. This is often something that business owners avoid. They don’t do it. They put it off, but it is so simple. It will only take you five minutes, and here is why it is so important.
The Importance of Meeting Minutes in Legal Cases
Once, I saw a business get sued, and the owner of the business also got sued for what happened in the business. Now, the owner had nothing to do with the conduct that occurred in the business. The claim was a breach of contract. So why would the owner be responsible for what happened in the company?
The Role of LLCs and Limited Liability
This was an LLC. That means LLC stands for limited liability company. In other words, the owner’s liability is limited. The owner shouldn’t be liable.
Discovery and the Importance of Meeting Minutes
This was a very aggressive party in a lawsuit. That party conducted discovery in the litigation to try to find out if the LLC had regular meeting minutes, minutes of the LLC members, and minutes of the board of governors. This was an LLC owned by one person. Do you have to have a meeting with one person?
The Claims Against Single-Member LLCs
So we are talking about an LLC that was owned by one person. Controlled and run by one person. And yet the person suing the LLC, the corporation, and the owner were claiming that because the owner failed to have LLC member meeting minutes and LLC board of governor minutes. The owner failed to treat the LLC as a separate business entity from the owner’s financial reserves.
The Legal Implications of Missing Meeting Minutes
The claim was that simply because those meeting minutes were missing, the person who initiated the lawsuit should be able to pierce the LLC veil or pierce the corporate veil and hold the owner personally liable.
Court Requirements for Limited Liability
Now, courts have said, “For a person to have limited liability and not be liable as a business owner for the conduct of their corporation or the LLC, the person needs to have standard formalities followed in the business, and one of those formalities is meeting minutes.”
Practical Recommendations for Creating Meeting Minutes
To be honest, I am not aware of any lawsuit where a court held that simply because meeting minutes were missing, the owner should be personally liable.
The cases usually list the lack of meeting minutes and other ways the owner failed to keep the corporation separate from the owner’s assets. But regardless, having meeting minutes is so easy.
So, here is what I recommend you do: Either use chat GPT or some other AI or you can simply open up a Microsoft Word document or Google Doc and write out the following:
Steps for Drafting Meeting Minutes
First, what is the name of the meeting? As an owner of a corporation, you will say, “Shareholder meeting minutes.” Or as the board for a corporation, you will say, “Board of directors meeting minutes.” So you will have the company name, and then you will have the name of the meeting. If it is an LLC, you will say, “LLC members meeting minutes.” So that is members of the owners, or you will have LLC board of governors meeting minutes. The board of governors is the board that oversees all the operations of the company.
So after you have the company name and the name of the meeting, then you have the date and the names of those who attended, so it might just be one business owner. The items that were discussed or reviewed at the meeting. So it might say, “Reviewed financials. Reviewed operations of the business.” It can be very short, and then any decisions that are made.
Finally, you can say that the meeting has been adjourned. If you want, you can set the time of day. Usually, these meeting minutes should be signed by the president or the secretary of the company. And usually, in a small business, that is the owner, but you put your name. And then the title of secretary next to it, because technically you are not signing as an owner, you are signing as the secretary of the company. As an owner, you may serve in many different roles.
The Simple Solution to Avoid Personal Liability
So what is the takeaway here? A very simple way to help ensure that you don’t have personal liability for debts and liabilities of your company is to have meeting minutes. And it takes AI five minutes to quickly put these together for you, or you can just quickly type them up. And if you want, you can hop on the internet and take a look at some samples there, but they don’t need to be long. You just have to have those key elements.
