Why You Should Care About Keeping Good Books
Keeping good books and records is a fundamental aspect of owning any business. Not only is it good practice, but it is required by law and often required by a company’s governing documents such as its bylaws, operating agreement or shareholder agreement. Yet the maintenance of company books is often neglected.
Clients often try to incorporate or organize an LLC on their own or via a service such as LegalZoom. Although this may be a viable way of forming an entity, it is far from the end of the process. When one forms an LLC in New York, for example, there is a requirement to publish—that is to advertise the formation of the LLC in two newspapers. Failure to do so on a timely basis can lead to dissolution by the State.
When organizing their businesses, my clients typically also order a corporate (company) kit. These kits come with standard (but incomplete) bylaws, operating agreements, meeting minutes, and form stock (or interest) certificates. The owners of most closely held companies (those owned by one or just a few individuals) usually put that kit on a shelf and never complete the documentation or issue the stock/unit certificates. In some cases, they often neglect to take other important actions such as filing for Subchapter S status.
In almost every case, a situation arises in which the clients need to produce the company documents urgently, most frequently in connection with obtaining a bank loan or other financing.
If you have neglected your books, it’s not too late to take steps to rectify the situation. Your attorney, working in conjunction with your accountant, can put your corporate or company books together so they’re ready when you need them.
Don’t allow yourself to fall into an “it’s just me and my brother, we don’t need to do all this stuff” mindset. It’s far better (and less costly) to be prepared—and not need it—than to need it and not be prepared.
Are your records complete and organized? Do you need help getting them to that point? Call Levine Law, LLC at (516) 921-6700.
Tel. (516) 921-6700