How to Take “Minutes” for Sole Proprietorships or Single Owner Small Businesses

How to Take “Minutes” for Sole Proprietorships or Single-Owner Small Businesses

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As we covered in How to Keep the S-Corp Filing Status, one of the legal requirements for a small business to maintain S-Corp status is documenting, in the form of “minutes,” what is discussed at shareholders’ or directors’ meetings and any major business changes or decisions.

But for sole-proprietorship and small family businesses owners, you’re probably thinking, “Do I really need these “minutes?” How would I hold corporate meetings with myself?”  “What even are minutes?” Well, those are the questions we’re going to answer for you today.

If you’re on the flip side and are looking for an in depth guide about how to take minutes for an S-Corp or any business that is larger and holding shareholders’ and directors’ meetings, check out our other article “How to Take Minutes at your S-Corp or Small Business’s Shareholders’ and Directors’ Meetings.”

What Does the Term “Minutes” Even Mean?

You are correct to assume that we’re not talking about the time when we say “minutes,” but that doesn’t mean it’s anything complicated. “Minutes” is actually just a corporate or business term for the notes you take about your business and the decisions concerning it, recorded in a somewhat official manner.

Do Sole-Proprietorships or Single Owner Small Businesses Need to Take Minutes?

The short answer is yes; you should still take minutes even if you’re the only person in the business. But don’t worry, it’s much less formal or tedious than it sounds.

If you’re the only member of an S-Corp, LLC, or operating a sole proprietorship, you can and should still keep a record of your major business decisions, even though you’re not holding shareholders’ or directors’ meetings. It’s smart for any business owner to be in the habit of keeping minutes.

Why Should Sole Proprietorships or Single Owner Small Businesses Take Minutes?

There are three main reasons why any business owner should take minutes.

  • The first reason is pretty obvious since we talked about the legal requirement of minutes for an S-Corp above. If your small business has S-Corp status, keeping that status is the big reason to take minutes, but these next two reasons apply to any type of business, S-Corp or otherwise.
  • Minutes help reduce the chance of a court “piercing the corporate veil,” which refers to a situation where a court disregards limited liability and holds the business owner, shareholders or directors personally liable for the business’s actions or debts.
  • Minutes can save you in the event of an audit. If you’re the only owner of your business, it may seem unnecessary to you right now, but the IRS will see it otherwise. Having good minutes can be a game changer if your business does get audited.

How to Take the Minutes for Sole Proprietorships or Single Owner Small Businesses?

If your business isn’t large enough to be holding shareholders’ and directors’ meetings, minutes really can just be you writing down notes and a description in a dated log whenever you make a business decision or change and keeping that log updated and in your records.

Are minutes really that simple? Yes! The important thing is just having some type of system so that all of your minutes are easily read and kept in the same place.

What is an Example of Taking Minutes for a Sole Proprietorship or Single Owner Small Business?

Let’s take Jeff and Laura for example. Jeff and Laura own a house cleaning business in Colorado and they decide they need to purchase a new cargo van. They should enter this purchase into their minutes log and give any details of the purchase.

They chose a specific model van because of its all terrain and all weather tire ratings since their business operates in Colorado, and they need a vehicle that can travel to clients’ homes year round. They also chose a white van so that they could avoid having to paint it company colors and could simply add a magnet logo.

They would enter the van description, purchase information, and these details into their minutes. Voila, Jeff and Laura now have official minutes.

What are the Key Takeaways?

  • Every business owner should take minutes, regardless of how small the business is.
  • Minutes help protect against courts “piercing the corporate veil”
  • Minutes are invaluable in the event of an audit
  • Minutes can just be a simple log of major business decisions 
  • The log should include any details or reasons behind the decision
  • When in doubt, add it to the minutes log. More records never hurt!

Still have questions about your sole proprietorship or small business? Maybe you’re ready to make the S-Corp election or let someone else handle the bookkeeping and small business taxes. Give us a call!

Categories: tax