When you form an LLC or Corporation, you’ll get some fancy paperwork from the Secretary of State. If you form your business through a commercial formation company, they may send a three-ring, leather-bound binder with separators for minutes, bylaws, and everything else. Many people just take that binder and leave it on the shelf collecting dust. What’s it good for, anyway? Well, you need to maintain those records diligently. The binder reminds you of the need to do so and gives you a convenient place to keep the records. Not only is record keeping required by Louisiana law, but the two best reasons you need a corporate book are business succession and litigation planning.
Business Succession Planning
Business succession is the process of changing ownership of your business. If you want to sell your business, the buyer will want to see your bylaws, meeting minutes, information on bank accounts, insurance policies, and leases, and the other important information kept in the book. Any important decisions made by the business owners should also be recorded in there. If a business owner suddenly dies or becomes incapacitated, that information will prove useful to the people who need to step up and run the business.
If your business is sued, Louisiana law will protect the owners from personal liability. The plaintiff can reach through this liability protection and seize personal assets if corporate formalities are not followed. One of those formalities is keeping corporate records in order. If your records aren’t in order, the other side may be able to prove that corporate is nothing more than an “alter ego” of the owners. If the court buys that argument, personal assets may be at risk.
Maintaining corporate records is definitely one of the least glamorous parts of owning a business. If your’e ever sued, or ever need to access important business information quickly, you’ll be glad you did.