Get Your Company Records Right with Help from BGS
July 10, 2024 | Carole Clark Isakson
Almost weekly, I am contacted by a small business owner who needs their company’s corporate records to be “updated.” This “update” request is usually prompted by ownership changes, the sale of the company, or a potential lender doing its due diligence. In all cases, those other parties want to make sure that the company they are buying or investing in has been properly formed, is properly managed, and has designated those with authority to bind the company.
And—in at least half of these cases—the reason the company records need updating is because the owners initially formed the entity without legal help. Many people know that the Minnesota Secretary of State provides forms for the initial Articles, but this is not enough. If all you do is file the Articles, you have done nothing more than create a shell of a company. It is unlikely that a lender will be satisfied with this, and anyone buying your company (except perhaps another existing owner) will insist that the company records be completed and corrected.
Filing Articles of Incorporation (for a corporation) or Organization (for an LLC) is only the first step. To complete those online, you will need the following:
- Proposed name of the entity
- Registered office and agent
- How many shares are authorized (in the case of a corporation)
- The name of the person setting up the entity
- An email address for notices
But if this is all you do, your records won’t even show who actually owns the company. Neither will your records show who the officers are (if your entity has officers). These are very basic matters. In addition, for any company with more than one owner, it is critical to discuss how and when an owner’s interest in the company can be transferred. What happens if an owner dies? Gets sued? Is divorced? Quits working? All of these types of decisions are typically included in a Buy-Sell Agreement (corp.) or Operating Agreement (LLC).
Don’t wait to take a closer look at your company record book. Rushing to complete these steps in the event of a sale or refinance will surely slow down your process, and in many cases will derail your proposed transaction altogether. Contact the Corporate & Business Law team at Barna, Guzy & Steffen to complete your company records with precise detail and set up your business for success.
The following attorneys contributed to this article:
