Closed corporations (including Nevada and Delaware LLCs) tend to have numerous characteristics in common. Some of these features are good or acceptable. However, some of the characteristics place closely held corporations in serious jeopardy. In this section you will find articles that discuss many of these characteristics and what to do to correct and / or prevent them. This article focuses on one aspect of corporate governance.
Most people know that large corporations have shareholders (LLCs usually don’t have public shareholders). In fact, many may own shares in large, publicly traded corporations. They are also aware that these corporations hold at least annual shareholders’ meetings to which they are invited. The invitation they receive usually contains an agenda for the shareholders’ meeting. The law in almost all states requires these types of meetings on a regular basis.
Why is this meeting necessary? The simplest answer is that the shareholders are the controllers or final bosses of the company. They elect and remove directors and give direction to directors, as well as take other important actions to give direction and substance to the corporation. Well, large corporations have a well-oiled staff that takes care of all of this to make it seem almost automatic.
Many small corporation and LLC owners do not understand that this requirement is as applicable to them as it is to the large corporations mentioned above. This is the same even if the corporation is owned by a husband and wife. It is critical that even a corporation of this size announce an annual shareholders meeting and that it actually takes place. The same issues should be covered in small corporations and LLCs that are covered in the large corporations mentioned above. Experience has shown that many small business owners think that shareholders’ meetings are pretty silly.
Believe me, regardless of your feelings towards this information, if you want to participate in a comprehensive program to protect your corporation, LLC and your personal wealth and assets, you must treat your corporation in all respects as one of the large corporations. discussed above. If you are attacked and most likely it is, the court will see if there is a distinction between you and the corporation. Failure to hold these types of meetings (as well as other recommendations discussed in other articles) will blur that distinction between you and the corporation and put the corporation and your personal assets at risk.
In conclusion, you should treat your corporation or LLC as large corporations are treated. One of them is an annual shareholders meeting. You may be in a jurisdiction that does not require an annual shareholders meeting. It is recommended that, even in those jurisdictions, these meetings be held as a constant reminder of the importance of treating a corporation as a separate entity. This is just good business practice. Good luck and much success in your business.
