The guide is designed for businesses new to corporate record keeping and those who want a quick refresher on how it works. One thing that all organizations have in common is paperwork. Tax forms, the company ledger, yearly reports, and other documents must be completed and filed. While maintaining corporate records isn’t the most enjoyable task, entrepreneurs must remain on top of their records if they want to operate a compliant organization. Scaling a firm requires organization on all levels, including your business documents. And, contrary to common assumptions, preserving business records isn’t all that difficult. However, to reduce bottlenecks, you must do it right. Continue reading to learn about the components of corporate record-keeping and some suggestions and tools for keeping your corporate documents safe and accessible.
What is the definition of corporate record keeping?
Let’s define what business records are before discussing how to preserve them. Corporate records are vital documentation regarding your company that you must keep as a U.S. corporation to verify you’re following state laws and the guidelines set out by the Internal Revenue Service (IRS). Consider it a documented record of your company’s choices and actions. Your business records are important papers and files that should be kept in a single, central location so that regulators can readily access them if they come to inspect your firm. As you would expect, corporate record-keeping refers to the act of organizing and archiving all of your company’s records. Records management, or record-keeping, refers to physical and electronic records at all levels of an organization.
The Fundamentals of Corporate Records Management
Let’s look at the subtleties of corporate record-keeping and what it includes.
Validation of Compliance
Corporate record keeping is beneficial to your company on a practical and legal level. For example, you may use corporate documents such as Annual reports are submitted every year. And prior income tax filings to monitor your corporation’s growth over time and offer future tax returns. More crucially, corporate record-keeping preserves the “corporate veil,” which refers to the separation of the corporation’s assets from the personal assets of the corporation’s owners. For example, let’s say someone files a lawsuit against your company. They may attempt to breach your business veil and go for your assets as part of their settlement. They’ll allege that your company has failed to adhere to the state’s corporate formalities. However, if you preserve all of your documents correctly, all of their claims will be rejected. In addition, because properly preserved corporate documents can demonstrate that your company has complied with all relevant regulations, any dangers to personal assets are eliminated. In other words, maintaining corporate records will protect you and your company against litigation and audits.
State-Mandated Requirements for Corporations vs. LLCs
Various laws in different states govern corporate records. On the other hand, corporations are subject to more state regulations than LLCs. Whether your company is a corporation or an LLC, the paperwork you’ll need to care for will differ.
Here are the files you must preserve at your place of business if you are a corporation:
- Articles of Incorporation, as well as any subsequent revisions, must be submitted to the state.
- Directors’ and executive’s names and addresses
- Shareholders’ names and addresses, as well as their number and class of shares
- Minutes of Meetings record all decisions and activities during shareholder and director meetings.
- Corporate bylaws that spell out how you want to govern the business.
- Annual reports are submitted every year.
The following records must be kept at your place of business for LLCs:
- Agreement on how to operate
- All members’ and managers’ names and addresses
- Articles of incorporation, as well as any revisions, must be submitted to the state.
Aside from documentation, additional factors such as how long to preserve and store records differ. If you decide to start doing business in other states, ensure your record-keeping practices are adjusted to meet the needs of that state. Please keep in mind that the preceding list is not exhaustive. It’s conceivable that you’ll need to add more things to it, but it’s also possible that your company won’t need to preserve every record.
Minutes of Meetings
Minutes of Meetings are an incredibly crucial part of corporate record keeping. They serve as the official record of corporate activities, where all significant votes, resolutions, and transactions that affect the company are appropriately documented. While corporations are generally required to keep Minutes of Meetings, LLCs don’t need to unless this task has been specially mentioned in the Agreement on how to operate.
Your Minutes of Meetings may also include the following activities:
- Stock is issued.
- New directors or officers are elected.
- Annual meetings of the board of directors and shareholders
- Increases in compensation
- Approval for financial choices such as asset sales, company loans, S corporation tax status elections, and business acquisitions.
- Approval of goods such as a group health plan, a long-term lease, and other essential choices influence the organization.
There’s a common misconception that Minutes of Meetings have to be excruciatingly detailed. This couldn’t be further from the truth. Instead, Minutes of Meetings are typically written in simple language, where the person responsible for them only outlines the basic facts.
Storage of corporate records
This is when things start to get interesting. The law requires you to maintain records, but it doesn’t specify how you should store them. This versatility allows you to choose a record-keeping approach that meets your needs and tastes. The one caveat is that you must guarantee that all of your documents are correctly organized, safe, and complete, regardless of your technique. Some business records use the more traditional method of physical papers, in which hardcopy data are printed and stored in a physical kit. Others prefer the more ecologically friendly, paperless way of keeping electronic records. Regardless of the approach you use, make sure you have a data backup as insurance in case of loss. When it comes to determining who is accountable for keeping the documents, things may become tricky. Different organization members create corporate records. The corporate secretary creates Minutes of Meetings during every board meeting; the board of directors establishes bylaws, passes resolutions, and prepares Annual reports submitted every year.; the accountants are responsible for creating and maintaining financial records and bank statements and tax returns, and so on. I advocate reminding everyone of their tasks to ensure everything is done appropriately for better outcomes.
Time Limit for Keeping Records
Entrepreneurs often ask how long they should maintain business records, depending on the item, expenditure, or event documented. First, you should figure out how long the recorded material has a statute of limitations. This is the amount of time you have to revise your tax return to obtain a refund or the time the IRS has to collect more taxes. Depending on the nature of the recorded item, the IRS advises maintaining records for two to seven years. The IRS has also made it mandatory for businesses to keep records of asset depreciation. For example, if an object depreciates for five years, all documents relevant to that item should be retained for the same amount of time. Maintaining corporate records is also necessary for organizational objectives and protects your company, regardless of IRS restrictions.
5 Tools to Help You Improve Your Company’s Record-Keeping
We’ll go through the five primary tools you may use to simplify record-keeping in the sections below.
1. Software for Records Management.
If you have an HR department, you need Software for Records Management. These tools are intended to manage the whole record lifespan, from creation to disposal. In addition, using record or document management software such as Microsoft SharePoint or OnBase can assist you in meeting legal retention requirements for your company papers and records, safeguarding you from fines, failed audits, and even prison time.
2. Minutes of Meetings Software.
As discussed, Minutes of Meetings are a significant part of corporate records. Therefore, you have to be thorough and quick when recording Minutes of Meetings. It would be best to consider using Minutes of Meetings software to keep track of all that happens in a meeting, including capturing notes, assigning action items, document formatting, and Minutes of Meetings distribution to team members. I strongly suggest using apps like Beenote and Meeting Booster.
3. Service for Cloud Storage.
As the name suggests, a Service for Cloud Storage allows you to store all your corporate records on the cloud, making them easily accessible on the go. Cloud storage is a cloud computing approach in which data is stored on the internet through a file hosting service such as iDrive or pCloud, which manages and operates data storage.
Aside from convenience, you can count on top-notch data security and lower service costs.
4. Software for Entity Management.
Software for Entity Management gives you a secure, cloud-based space to store all information, documents, and organizational charts related to your entity to create a single source of truth for corporate record keeping. Company secretaries may use this software to manage the correctness of business records over time, utilizing compliance calendars, reminders, and processes for better data, reporting regulatory obligations, and electronically filing statutory forms with worldwide regulatory organizations. Diligent, Wrike, and ADP SmartCompliance are our top management software picks.
5. Payroll and Accounting Software.
Accounting software may assist you in creating customer invoices while also improving accounting fundamentals and capturing accounts receivable, among other things. Ponte the hand, payroll software will handle the creation of payroll tax records (Forms W-2, Forms 1099-MISC, Forms 1099-NEC, Forms 941). Furthermore, the program will take the design and submission of these documents to the proper authorities. While my favorite accounting software choices are Zoho Books and QuickBooks, I’ve had excellent luck using ADP and OnPay payroll services.
3 Ways to Boost Your Company’s Record-Keeping
Now that we’ve covered the tools, here are a few pointers on maintaining better corporate records and keeping your blood pressure down throughout audit and tax season.
1. Proper indexing and categorization are essential.
At all times, you must know where all of your information is. You’ll need to precisely index and classify every document maintained for corporate record keeping. You should be able to find any file and differentiate between current and archive documents with ease.
2. Disposal of Documents in Practice.
You should evaluate record retention requirements and know when to delete them, just as you should review record retention obligations. Final disposal dates are when legal, statutory periods end, after which you may delete expired data without fear of legal consequences. Consider collaborating with a NAID AAA Certified shredding firm to guarantee that all of your data are adequately destroyed and that the chain of custody is maintained.
3. Employee Education and Training.
Every employee in your firm should be familiar with your record management rules and processes, so workforce training is necessary. The concept is straightforward: the more you teach your staff about corporate record-keeping best practices, the more safely and effectively they will manage your data. For example, to advise staff on how to keep or delete essential data, I propose issuing written copies of your records retention policy. You may also organize regular training sessions to keep your employees up to speed on the latest privacy and compliance legislation and trends.
Conclusion
Now that you have a basic understanding of corporate record-keeping, the next step is to put what you’ve learned into practice. Begin by incorporating our recommended set of tools into your business system to capture and manage all relevant data safely and orderly To put your staff up for success, you should also teach them corporate record-keeping best practices. For further information, see the Quicksprout instructions below: Record keeping is the process of documenting and storing data about business transactions. This includes all types of information, such as financial records, customer orders, invoices, inventory, payrolls, and more. Record keeping can also be used to maintain a history of events if legal proceedings are necessary.
Frequently Asked Questions
How do you maintain corporate records?
A: When working in a corporation, it is essential to maintain the appropriate records. For example, you would have to keep track of your expenses and income for tax purposes. If your company has multiple offices, you will need to maintain separate spreadsheets with each office’s transactions happening independently so that anyone makes no mistakes from mixing up information between different companies. It also includes keeping records of every document which may be necessary for future reference, both inside and outside of work hours
What must corporate records be kept?
A: To comply with federal law, companies must keep certain records at a specific level of detail. These are known as the corporate recordkeeping requirements. Therefore, company officers who manage company finances and those involved in financial decisions should be familiar with corporate finance laws and the idea that they must maintain good record-keeping practices.
How do I keep records for my small business?
A: Here are a few ways for you to keep records for your small business. First of all, make sure to have accounting software compatible with the type of company. Next, use spreadsheets and applications like Microsoft Excel or Google Drive, which provide some form of automation features that would help track income and expenses on multiple levels to save time when it comes down to crunching numbers. Finally, always remember paper backup methods as they can come in handy if something happens with electronic data files, such as natural disasters
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