It's hard work being a business owner and after the initial formation, many business owners tuck their corporate records into a file cabinet and focus on building their business. However, whether you own a corporation, LLC, or partnership, it’s important to make sure all your corporate records are up-to-date on an annual basis.
There are several reasons why it is important stay on top of corporate record keeping. Foremost, the Ohio Revised Code imposes record keeping requirements on all Ohio business entities. The requirements vary depending on the type of entity you formed, but the importance of proper records is the same for the following reasons:Liability Protection: One of the main reasons for forming a business entity in the first place is to have protection from personal liability, often referred to as the “corporate veil.” However, under certain limited circumstances, the corporate veil can be pierced and the individual owners held personally liable. One of the circumstances is whether a company followed the proper record keeping requirements.
- Tax Audit: In the event of an audit, it is important that all corporate records are up to date.
- Income Tax: Having a complete corporate record book will enable a business to maximize deductions and keep track of important transactions.
- Acquisition/Merger/Financing: A potential buyer or lender may want to review the corporate record books as part of the due diligence process. Having a complete and organized corporate record book may increase the value of the business to a buyer and reduce underwriting risk to a lender.