How To Keep Your Corporate Records Up To Date And Why You Should

Businesses of all sizes have one thing in common: paperwork. There are dozens of records, including contracts, bills, bank statements, a register of shareholders and directors, tax documents, and other important corporate records that must be organized and kept for years. Any business owner looking back at a few years’ worth of records is likely to be amazed at the sheer number of files involved and the amount of digital and physical storage space they may take up. Looking at all the documents, you may begin to wonder, “Do I really need all this?” The short answer is “Yes.” However, as a business owner, you may have many unanswered questions about maintaining your corporate records and organizing your business paperwork to comply with state and federal laws and regulations. The business attorneys with Harrison Law, PLLC, have served as trusted legal advisors for business owners in the Phoenix metro area and throughout Arizona for more than 25 years. Reach out to our law firm to schedule a case review to get further assistance on how our attorneys can assist you. Call (480) 320-2310 today.

Why Should Corporate Records Be Kept Up to Date?

Many business owners get so busy managing and growing their companies that they may forget to keep accurate records. Failure to keep corporate records up to date is often due to the owners’ lack of understanding of why accurate record-keeping is so crucial. Below are some of the few reasons why it is important to ensure that your company is keeping accurate records:

• Organizing information: Accurate record-keeping helps a business stay organized and make informed decisions about its operations because the owner will be able to monitor the company’s performance and track its finances.
• Complying with the law: Requirements for record-keeping vary from one state to another. However, most states have laws in place that require corporations to follow certain procedures. For example, corporations in Arizona must hold a meeting of shareholders annually at a time stated in the bylaws pursuant to Arizona Revised Statutes § 10-701. Keeping records of such meetings shows the corporation’s compliance with the law.
• Facilitating future sales: Many business owners plan on eventually selling their company. If the sale is your short- or long-term goal, you need to understand that potential buyers will want to see many of the corporate records before the deal is closed. When your records are not organized, incomplete, or non-existent, it can scare off potential buyers and delay the sale of your business.
• Preparing for audits: If your company is ever audited, the auditor will most likely request all of your company’s records. Accurate record-keeping can make your company audit-ready and minimize the amount of time and money that would be necessary to organize or retrieve some of the old records.

If you are not sure how to get started with record-keeping in your particular situation, reach out to Harrison Law, PLLC, to get legal guidance. A business law attorney may be able to assist you in making sure your paperwork is in order and everything is compliant with the applicable laws and regulations.

How Do You Keep Corporate Records the Right Way?

Often, following a few simple steps can help to set a business on the path to sound record-keeping practices and regulatory compliance. Below is a list of some of the tips on how to maintain proper records of your business’s operations:

• Keep a register of shareholders. This list should include the names and addresses of the company’s shareholders as well as the shares held by each of them.
• Keep a register of directors. This list should identify the names and addresses of the company’s directors as well as their appointment dates.
• Keep minutes of shareholder meetings. These records help to document decisions made by the company’s shareholders.
• Keep minutes of board meetings. Any internal decision-making bodies’ processes should be carefully documented and kept up to date.
• Keep relevant financial records. Tax returns, accounting records, cash flow statements, and many other documents related to a company’s financial activities will need to be saved and filed appropriately for ease of reference.
• Keep other important documents. Common examples include the company’s licenses and permits, leases, contracts, agreements, and others.

Following these steps with the appropriate level of detail can help you keep business records accurate and up to date. As a rule of thumb, business records should be kept for at least seven years, though the timeframe may vary depending on the type of documents. As for tax records, the Internal Revenue Service recommends keeping records from two to seven years (in some cases, indefinitely), depending on the type of record.

What Happens if You Do Not Keep Corporate Records Up to Date?

As a business grows, and responsibilities mount, business owners may begin to pay less attention to corporate record maintenance. However, there are a number of consequences that may be associated with a failure to keep corporate records up to date, including:

• Difficulty making business decisions: If your corporate records are not accurate and up to date, executives may find it challenging to make important business decisions, such as how to expand operations and whether it is time to change a business strategy.
• Loss of credibility: Failing to keep a company’s records up to date may result in the loss of credibility and trust among partners, clients, customers, and stakeholders. They may begin to question an owner’s ability to run their business effectively, which can severely damage your existing business relationships and negatively impact the ability to form new ones.
• Fines, loss of license, and personal liability: Maintaining up to date business records is not just a crucial element of the smooth operation of a business. Failure to keep those records up to date may expose companies to potential fines, loss of business license, or even personal liability for any damages caused by non-compliance with state or federal laws or regulations.

By prioritizing accurate record-keeping, business owners can safeguard themselves from the above-mentioned and many other legal, tax, and financial consequences.

Get Trusted Legal Advice From a Business Attorney in Arizona

Knowing how to keep your corporate records up to date – and understanding why this should be done in the first place – can help increase the effectiveness of your business while also avoiding serious legal risks in the process. Inaccurate record-keeping can result in a number of unwanted consequences that can be costly both financially and reputationally. The experienced Arizona business lawyers at Harrison Law, PLLC, may be able to provide you with the trusted legal advice you need to enhance records management efficiency and ensure that you comply with the applicable laws and regulations. Call (480) 320-2310 today to schedule your consultation.

© 2024 Matthew W. Harrison and Harrison Law, PLLC All Rights Reserved

This website and article have been prepared by Harrison Law, PLLC for informational purposes only and does not, and is not intended to, constitute legal or financial advice. The information is not provided in the course of an attorney-client relationship and is not intended to substitute for legal advice from an attorney licensed in your jurisdiction.