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Would Your Corporation or LLC Records Survive an Audit? Part 1

Would Your Corporation or LLC Records

Survive an Audit?

Five Steps to Statutory Compliance

1. Does your Corporation or Limited Liability Company Record Book Contain the Following?

? A Corporate/LLC Record Book

? Minutes of Preliminary Meeting of Incorporators/Members

? Articles of Incorporation or Certificate Formation

? Waiver of Notice of Organizational Meeting of Shareholders/Members

? Minutes of Organizational Meeting of Shareholders/Members

? Waiver of Notice of Organizational Meeting of Directors

? Minutes of Organizational Meeting of Directors

? Corporate Bylaws

? Limited Liability Company Operating Agreement

? Stock/Unit Register

? Stock/Unit Certificates

? Corporate/Limited Liability Company Seal

? Initial Annual Report

? Annual Reports for each year of business

2. Conduct Annual Meetings of Shareholders, Board of Directors, Members and Managers

Corporations

The Washington Business Corporation Act and the Washington Limited Liability Company Act contains the following provisions relating to keeping corporate and limited liability company records:

RCW 23B.07.010 Annual Meeting, states, in pertinent parts, as follows:

(1) a corporation shall hold a meeting of shareholders annually for the election of directors at a time stated in or fixed in accordance with the bylaws.

(2) Annual shareholders' meetings may be held in or out of this state at the place stated in or fixed in accordance with the bylaws. If no place is stated in or fixed in accordance with the bylaws, annual meetings shall be held at the corporation's principal office.

(3) The failure to hold an annual meeting at the time stated in or fixed in accordance with a corporation's bylaws does not affect the validity of any corporate action.

(4) Shareholders may act by consent set forth in a record to elect directors as permitted by RCW 23B.07.040 in lieu of holding an annual meeting.

RCW 23B.07.020 Special Meeting states, in pertinent parts, as follows:

(1) A corporation shall hold a special meeting of shareholders:

(a) On call of its board of directors or the person or persons authorized to do so by the articles of incorporation or bylaws; or

(2) Special shareholders' meetings may be held in or out of this state at the place stated in or fixed in accordance with the bylaws. If no place is stated or fixed in accordance with the bylaws, special meetings shall be held at the corporation's principal office.

(3) Only business within the purpose or purposes described in the meeting notice required by RCW 23B.07.050 (3) may be conducted at a special shareholders' meeting.

RCW 23B.07.050 Notice of Meeting states, in pertinent parts, as follows:

(1) A corporation shall notify shareholders of the date, time, and place of each annual and special shareholder’s meeting. Such notice shall be given no fewer than ten nor more than sixty days before the meeting date …

(2) Unless this title or the articles of incorporation require otherwise, notice of an annual meeting need not include a description of the purpose or purposes for which the meeting is called.

(3) Notice of a special meeting must include a description of the purpose or purposes for which the meeting is called.

Limited Liability Companies

The Washington Limited Liability Company Act, RCW Chapter 25.15, has embraced a more relaxed approach to mandating that annual and special meetings of Members and Managers be conducted. That said, Members and Managers of Washington LLC’s represented by this office are strongly encouraged to follow general corporate law requirements when conducting business as an LLC.

RCW 25.15.060 Piercing the Veil states, in pertinent part, as follows:

Members of a limited liability company shall be personally liable for any act, debt, obligation, or liability of the limited liability company to the extent that shareholders of a Washington business corporation would be liable in analogous circumstances. In this regard, the court may consider the factors and policies set forth in established case law with regard to piercing the corporate veil, except that the failure to hold meetings of members or managers or the failure to observe formalities pertaining to the calling or conduct of meetings shall not be considered a factor tending to establish that the members have personal liability for any act, debt, obligation, or liability of the limited liability company if the certificate of formation and limited liability company agreement do not expressly require the holding of meetings of members or managers. Continued in Part 2.

The foregoing compilation of Washington Laws on Corporate/LLC Complianceis provided as a courtesy of the

Law Offices of Gene R. Moses P.S.

2200 Rimland Drive· Suite 220

Bellingham, Washington 98226-6643

Telephone: (360) 676-7428 · Fax: (360) 676-4068

Email: [email protected] · www.genemoses.net

© 2012 The Law Offices of Gene R. Moses P.S.

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