Why Every Business Should have an Annual Meeting
Most people hate meetings. Let's face it, you didn't start a business to sit in a meeting. However, having an annual meeting is often legally required and, as practical matter, is time well spent.
Unfortunately, many business owners either don't understand the importance of having an annual meeting or simply forget to have one. In either case, not having annual business meetings can, and often do, come back to haunt business owners.
Depending on how you business is organized (incorporate, a partnership or limited liability company), your organizational documents in almost all cases requires an annual meeting. The business may have to have officer elections or agree upon company valuation.
If you fail to follow the legal requirements of your company organizational documents you will run the risk that the protection that you built for yourself and the company will be lost.
While it is important to every business owner to understand what is legally required by their company organization documents, there are also very practical benefits to holding an annual meeting.
1. It is very valuable to have a meeting to go over what has happened in the business last year and to plan for the coming year. Better decisions are made when the owners are able to step back from the everyday stress of running a business. An annual meeting allows the owners to proactively look at the "big picture" instead of always responding to a crisis.
2. If you forgot to hold meetings and pass resolutions authorizing business actions in the past year, you can authorize them after-the-fact. While this is not the preferred way to maintain your business entity book, it is preferable to not doing it at all.
3. You can authorize business actions for the coming year (i.e., authorizing an officer to explore the purchase of certain equipment)
4. The owners can agree to a company valuation for the coming year to reduce the likelyhood that there will be a dispute if an owner is boughtout during the coming year. It is much easier to come to an agreement when none of the owners know whether they will be a seller or buyer.
5. In many businesses, the owners do not do a great job of communicating with each other during the year. An annual meeting helps make sure that everyone is still on the same page and make a dispute less likely in the coming year.
While everyone hates meetings, an annual meeting for your business is a great way to head off problems, create a blueprint for your business for the coming year and to make sure that you don't lose the protections offered by your business entity. So don't avoid the annual meeting, embrace it as a vital part of your business plan!
The foregoing is not intended to constitute legal advice for any specific circumstance, but is intended to reflect broadly applicable principles, under Minnesota law, relevant to a typical situation. Each set of facts and each contract is, or can be unique; the unique facts and specific language of the contract may require a different legal analysis and may result in a different outcome. Before proceeding in reliance upon this or any other general description of law, consult with an attorney competent in the field of practice relevant to your situation.
Copyright 2011 Nash Law Firm