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Q.How can corporate minutes reduce my tax burden?
A.Corporate minutes can be the proof you need to back up your position if the IRS challenges an item on your return. Besides the election of officers and directors, other actions that should be taken at regular or special board meetings and shareholder meetings include, but are not limited to:
- approving the accrual of any bonuses paid to officers and/or retirement plan contributions;
- approving corporate borrowing and any loans from shareholders to the corporation (and the terms of the loan) to restrict the ability of the IRS to reclassify the loans as taxable dividends;
- approving and justifying with a valid business purpose (e.g. expansion) the accumulation of more than $250,000 of earnings ($150,000 if personal service corporation), to avoid paying a special accumulated earnings tax;
- approving and justifying the compensation package given to the officer of the business, to limit the ability of the IRS reclassifying the income as a dividend;
- approving the establishment of fringe benefit plans (such as a retirement, health, or group life insurance);
- approving the issuance or sale of stock; and
- approving the sale, lease, conveyance, exchange, transfer, or other disposition of all or substantially all corporate property and assets.
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