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Real Estate Professionals

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Newlyweds Tax Tips

Tax Benefits
A taxpayer who spends significant time in activities related to real estate may qualify as a “real estate professional,” which can provide tax benefits.

Passive Loss Limits
A passive activity is generally defined as a business activity without a minimum amount of “material participation” by the taxpayer. A taxpayer is not allowed to deduct losses from passive activities in excess of income from passive activities. Any unused losses from passive activities must be carried forward until there are gains from passive activities, or until the passive activities that generated the losses are disposed of.

Special Rules for Real Estate Activities
Under passive loss rules, rental real estate activities are considered passive activities regardless of whether the taxpayer met the definition of “material participation.” In other words, for most rental real estate activities, losses in excess of income are not deductible in the year incurred.
Exception for real estate professionals. If a taxpayer qualifies as a real estate professional, passive activity loss limits do not apply to the losses from the taxpayer’s rental activities. For a real estate professional, losses
may be deducted in the year incurred even if the losses are greater than income.
Qualifying as a real estate professional. A taxpayer will qualify as a real estate professional if the following requirements are met

1) More than half the personal services the taxpayer performed in all trades or businesses during the tax year were performed in real property trades or businesses in which the taxpayer materially participated, and
2) The taxpayer performed more than 750 hours of services during the tax year in real property trades or businesses in which the taxpayer materially participated.
Personal services performed as an employee do not count unless the taxpayer was a 5% or greater owner of the employer.
Real property trades or businesses include development, construction, acquisition, conversion, rental, operation, management, or brokerage of real property.

Material Participation

Material participation is defined as the taxpayer being involved in the activity on a basis that is “regular, continuous, and substantial.” The taxpayer will be considered to materially participate in an activity if:
1) The individual worked in the activity for more than 500 hours during the year,
2) The individual’s participation in the activity constitutes substantially all of the participation in the activity of all individuals for the tax year, including the participation of individuals who did not own any interest in the activity,
3) The individual participated in the activity for more than 100 hours during the tax year, and the individual’s participation was at least as much as any other individual for the year,
4) The activity is a “significant participation activity” for the year (more than 100 hours participation per activity with aggregate of 500 hours),

Real Estate Professionals

5) The individual materially participated in the activity for any five (whether or not consecutive) of the ten immediately preceding tax years,
6) The activity is a personal service activity and the individual materially participated in the activity for any three preceding tax years, or
7) Based on all the facts and circumstances, the individual participated in the activity on a regular, continuous, and substantial basis during the year. This test is not met if the individual participated in the activity for 100 hours or less during the year. Managing the activity does not count for this purpose if any person other than the individual received compensation for managing the activity, or any individual spent more hours during the year managing the activity.

Election to combine rental activities. For purposes of qualifying as a real estate professional, each of the taxpayer’s rental activities are treated as separate activities unless the taxpayer elects to treat all interests in rental real estate as a single activity. Failure to make the election can trigger passive loss limits for real estate professionals. To make the election, the taxpayer must file a statement with the original income tax return declaring that he or she is a qualified taxpayer for the taxable year and is making the election to treat all interest in rental real estate as a single rental real estate activity. The election is binding for the taxable year it is made and for all future years whether or not the taxpayer continues to be a qualifying taxpayer. A taxpayer may revoke the election only in the taxable year in which a material change in facts and circumstances occurs.

Example: Leo is a real estate agent who spends more than
750 hours and more than 50% of his time selling real estate.
He also owns several rental properties. As a real estate professional, in order for Leo to treat his rental properties as nonpassive activities, he would either have to pass the material participation rules for each separate rental property or elect to combine all rentals into one activity and meet the material participation rules as a group

Court Case: For over 20 years, the taxpayer had been involved in real estate properties. For the years at issue the taxpayer aggregated all rental income and expenses as a single activity on his tax return, but did not attach an election to treat the activities as a single activity. The Tax Court stated that a taxpayer must clearly notify the IRS of the intent to make the election. Without treating the rental properties as one activity, the taxpayer was not able to meet material participation requirements. Net losses were treated as passive losses, and the deductions were not allowed under passive loss rules.
(May, T.C. Summary 2005-146)

Special $25,000 Loss Allowance for Rental Real Estate

Regardless of passive loss rules, a taxpayer is allowed to deduct up to $25,000 in losses from rental real estate if the taxpayer actively participated in the activity. The special loss allowance begins to phase out at incomes above $100,000.

Married Filing Separately. The phaseout begins at $50,000 for taxpayers using the filing status of Married Filing Separately. Additional limits apply.

Active participation. Active participation is not the same as material participation. Active participation standards are met if the taxpayer (or taxpayer’s spouse) participates in the rental activity in a significant and bona fide sense.
The taxpayer (and/or spouse) must hold at least 10% by value of all interests in the activity during the year.

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Newlyweds Tax Tips

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Newlyweds Tax Tips

Tips for Newlyweds

Updating your status from single to married may bring about some unanticipated changes, including changes relating to your taxes. While wedding planners don’t typically use an IRS checklist, here are a few things to keep in mind when filing your first tax return as a married couple.
As with any tax issue, contact your tax professional to help you navigate your own unique situation.

Notify the Social Security Administration (SSA)

If one of you has taken on a new name, report the change to the SSA. File Form SS-5, Application for a Social Security Card.
It is important that your name and Social Security Number match on your tax return. The IRS will match your information with records provided by the SSA and, if the records don’t match, any electronically filed return will be rejected and any paper filed return will be delayed until the error is corrected.
Avoid making a name change too close to tax season. While the SSA can process a name change in about two weeks, the delay in data-sharing between the SSA and the IRS can make any change near the end of the year problematic. In such situations, it may be advisable to file the tax return using your maiden name and change your name with the SSA after the return has been filed.
Form SS-5 is available on the SSAs website at www.ssa. gov, by calling 800-772-1213, or by visiting a local SSA office. A copy of your marriage certificate and driver’s license or passport will be required.

Notify the IRS If You Move
The IRS will automatically update your new address upon filing your next tax return, but any notices the IRS sends in the meantime may not get to you. The U.S. Postal Service does not forward certain types of federal and certified IRS mail. IRS Form 8822, Change of Address, is the official way to update the IRS of your address change. Download Form 8822 from www.irs.gov or order it by calling 800-TAX-FORM (800-829-3676).

Notify the U.S. Postal Service
To ensure your mail, including mail from the IRS, is forwarded to your new address, you’ll need to notify the U.S. Postal Service. Submit a forwarding request online at www.usps.com or visit your local post office.
Most post offices will not forward refund checks so be sure the IRS has your correct address. Using electronic direct deposit for refunds can prevent them from being delayed due to address mix-ups.

Notify Your Employer
Report your name and/or address change to your employer(s) to make sure you receive your Form W-2, Wage and Tax Statement, after the end of the year.

Notify Financial Institutions
Financial institutions with which you do business need to be notified to ensure that any Forms 1099 are sent to the proper address. This would include banks and brokerage firms, as well as employer-sponsored retirement plans.

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Newlyweds Tax Tips

Check Your Withholding
If you both work, keep in mind that you and your spouse’s combined income may move you into a higher tax bracket. The IRS Withholding Calculator, available at www.irs.gov, can help you determine whether you need to give your employer(s) a new Form W-4, Employee’s Withholding Allowance Certificate. Use the results to fill out and print Form W-4 online and give it to your employer(s).

Select the Right Tax Form
Choose your individual income tax form wisely because it can help save you money. Newlywed taxpayers may find that they now have enough deductions to itemize on their tax returns, rather than taking the standard deduction. Itemized deductions must be claimed on Schedule A (Form 1040). Note that beginning in tax year 2018, Forms 1040A and 1040EZ are no longer available.

Choose the Best Filing Status
Your marital status on December 31 determines whether you are considered married for that entire year for tax purposes. The law generally allows married couples to choose to file their federal income tax return either jointly or separately in any given year. Figuring the tax both ways can determine which filing status will result in the lowest tax.
For most married couples, filing jointly will result in a
lower tax liability. This is especially true if there is a significant difference in your incomes. The so-called “marriage penalty” only applies to couples who both earn relatively high salaries.
Certain situations may make it more advisable for married taxpayers to file separately.
• If both spouses have their own itemized deductions, such as medical deductions,

they may be able to claim higher overall deductions because of the percentage limitations on Schedule A (Form 1040).
• If one spouse has past due debt with the IRS or another government agency, such as child support obligations or student loans, filing separately will prevent the other spouse’s share of any refund from being used to offset debts for which he or she is not liable.
• If one spouse has messy or missing records, or is thinking of taking a risky tax position, the other may want to file separately to avoid becoming liable for potential additional taxes or penalties.

Planning for your wedding may be over, but don’t forget about planning for the tax-related changes that marriage brings. More information about changing your name, address, and income tax withholding is available on www.irs.gov, or contact your tax professional.

Simple Projections
Based on your tax information from last year, you can prepare a dummy return to show what your tax situation would be if you had been married. You can print out Form 1040, other tax forms, and tax tables from www. irs.gov. On the blank forms, combine tax information from last year’s returns. For example, combine the wage amounts from both returns and enter the total on Form 1040, line 1, of the blank form. Do the same for items such as interest, other income, and include deductions if either person itemized.
Use filing status, deductions, and any credits as if you had been married. The resulting tax and refund or amount due will give you an indication of whether your current withholding is sufficient to cover your tax liability when incomes are combined and will also help identify any problems that may need to be addressed when you file as married taxpayers.

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Employee or Independent Contractor

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Employee or Independent Contractor

Employee or Independent Contractor?

In order for a business owner to know how to treat payments made to workers for services, he or she must first know the business relationship that exists between the business and the person performing the services. A worker’s status determines what taxes are paid and who is responsible for reporting and paying those taxes.
A worker performing services for a business is generally an employee or an independent contractor. If a worker is classified incorrectly, the IRS may assess penalties on the employer for nonpayment of certain taxes.

Penalties and Interest
When the IRS determines that a worker is actually an employee rather than an independent contractor, the employer is subject to penalties for failure to withhold and remit income, FICA (Social Security and Medicare) and FUTA (federal unemployment tax) taxes, interest on the underpaid amounts, and penalties for failure to file information returns. The state will also seek to collect workers’ compensation and unemployment compensation premiums for unreported wages.

Independent Contractor
An independent contractor is self-employed and is generally responsible for paying his or her own taxes through estimated tax payments. A business issues Form 1099-MISC, Miscellaneous Income, to any one independent contractor, subcontractor, freelancer, etc., to whom the business made $600 or more in payments over the course of the tax year.

The business is not generally responsible for withholding income tax or FICA.

Employee
A worker treated as an employee will be issued Form W-2, Wage and Tax Statement, for wages paid. The business hiring the worker is responsible for withholding income tax and FICA. The employer is also liable for FUTA and various state employment taxes. Also, the employee may be eligible for certain fringe benefits offered by the employer, such as health care.

Factors to Determine Worker Status

The general rules for classifying workers as independent contractors or common-law employees center on who has the right to control the details of how services are to be performed. The factors can be grouped into three categories.
1) Behavioral control. Factors that indicate a business has the right to control a worker’s behavior include the following.
• Instructions that the business gives to the worker. Employers generally control when and where work is to be done, what tools or equipment to use, what workers to hire or to assist with the work, where to purchase supplies and services, what work must be performed by a specified individual, and what order or sequence to follow.
• Training that the business gives to the worker. Employees may be trained to perform a service in a particular manner. Independent contractors generally use their own methods.

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Employee or Independent Contractor

2) Financial control. Factors that indicate a business has the right to control the business aspects of a worker’s job include the following.
• Extent of the worker’s unreimbursed business expenses. Independent contractors are more likely to incur expenses that are not reimbursed, such as fixed overhead costs that the worker incurs regardless of whether work is currently being performed.
• Extent of the worker’s investment. Independent contractors often have significant investment in facilities used to perform services for someone else, such as maintaining a separate office or other business location.
• Extent to which the worker makes his or her services available to the public. Independent contractors are generally free to offer their services to other businesses or consumers. They often advertise and maintain a visible business location.
• Method of payment for services performed. Employees generally are guaranteed a regular wage and work for an hourly fee or a salary. Independent contractors are generally paid a flat fee for a specific job. Exceptions apply to some professions, such as accountants and lawyers who charge hourly fees for their services.
• Extent to which the worker can make a profit. Independent contractors can make a profit or a loss.
3) Type of relationship between the parties. Factors that indicate the type of relationship include the following.
• Written contracts that describe the relationship and intent between the worker and the business hiring the worker.
• Employee-type benefits provided to worker. Employers often provide fringe benefits to employees, such as health insurance, pensions, and vacation pay.
• Permanency of the relationship. Employer-employee relationships generally continue indefinitely.
• Extent services performed by the worker are a key aspect of the business hiring the worker. A worker who is key to the success of a business is more likely to be controlled by the business, which indicates employee status.

For example, an accounting firm hires an accountant to provide accounting services for clients. It is more likely that the accounting firm will present the accountant’s work as its own and would have the right to control or direct that work.

Incorrect Treatment of Employees as Independent Contractors

A worker who receives a 1099-MISC instead of a W-2 has two options.
1) Agree with the way the business has classified the worker, file Schedules C and SE, and pay self-employment tax on the earnings, or
2) File Form SS-8, Determination of Worker Status for Purposes of Federal Employment Taxes and Income Tax Withholding. The IRS will then decide if the worker should have been treated as an employee, subject to income and FICA tax withholding. If the IRS agrees that the worker really is an employee, the employer will be liable for employment taxes. However, if the IRS determines that the worker is really an independent contractor, the worker will be liable for paying SE tax.

Example: Harold owns a restaurant and hires Jim, a gardener, to mow the lawn and weed the landscaping once a week. The contract states that Jim will arrive at the restaurant on Monday mornings, mow the lawn, pull weeds, and tend to the landscaping. In exchange, Harold agrees to pay Jim $50 for this service each week. Jim supplies his own lawnmower, weed eater, and hedge clippers. Jim decides what time he arrives and how long the job will take him. Harold does not supervise Jim in his tasks or dictate to him how they are to be done. Jim is an independent contractor.

Example: Jeffrey owns Jeffrey’s Gardening Service and employs three gardeners to perform services for his business. Jeffrey pays his gardeners a fixed wage and withholds taxes, FICA, and various benefits and remits those withholdings to the appropriate government agencies. In addition, Jeffrey provides his employees with the tools and equipment they need to perform their work, instructs his employees which jobs to go to, and supervises them while they are doing their work. Jeffrey’s workers are employees.

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Inventory/ Cost of Goods Sold

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Inventory/ Cost of Goods Sold

Inventory

An inventory is necessary to reflect gross profit when the production, purchase, or sale of merchandise is an income-producing factor. However, if an inventory is necessary to account for your income, you generally must use and accrual method of accounting for sales and purchases, unless you are a small business taxpayer.

Small business taxpayer. You are a small business taxpayer if you have average annual gross receipts of $25 million or less for the prior three tax years and are not a tax shelter.

Method of accounting. All taxpayers must use a method of accounting for inventory that clearly reflects income. If you choose not to keep an inventory, you will not be treated as failing to clearly reflect income if your method of accounting for inventory treats inventory as non-incidental material or supplies, or conforms to you financial statement treatment of all inventories.

Cost of Goods Sold

If a business manufactures products or purchases them for resale, some expenses are included in figuring cost of goods sold (COGS). Expenses includable in COGS are not deductible until the item is sold, even if the business qualifies to use the cash method of accounting. The following are examples of expenses that go into figuring COGS.
• The cost of merchandise and products that are resold to customers.
• Raw materials and supplies that physically become part of a product, including the cost of having them shipped to the taxpayer, but not the cost of shipping the finished product to customers.
• The cost of storing the products until sold.

• Direct labor costs, including contributions to retirement plans, for workers who produce the products (manufacturing business), but not the cost of labor in a wholesale or retail business (buying and selling products).
• Indirect costs such as factory overhead expenses if the taxpayer is subject to uniform capitalization rules (UNICAP).
The cost of goods sold deduction is calculated as follows.
• Value of inventory at beginning of the tax year, plus
• Purchases and other costs during the year, minus
• Value of inventory at the end of the tax year.

Inventory Valuation Methods

The taxpayer must have a method for identifying and valuing the items in inventory. One of the following methods is generally used.

Specific identification method. For example, a car dealership can identify specific inventory items and match them with specific cost invoices. If the specific identification method cannot be used, FIFO or LIFO is generally used.

First-in first-out (FIFO) method. The FIFO method assumes that items purchased or produced first are the first items sold, consumed, or otherwise disposed of. Items in inventory at the end of the tax year are matched with costs of similar items that were most recently purchased or produced.

Last-in first-out (LIFO) method. The LIFO method assumes that items of inventory purchased or produced last are the first items sold, consumed, or otherwise disposed of. LIFO rules are complex. IRS approval is required and may be obtained by filing Form 970, Application to Use LIFO Inventory Method.

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Inventory/ Cost of Goods Sold

Materials and supplies. Unless a deduction was claimed in a previous year, the cost of materials and supplies is generally deductible when actually consumed and used during the tax year. If items that would normally be required to be included in inventory are treated as materials and supplies, the cost is deductible in the year the inventory item is sold, or the year the materials and supplies are paid for, whichever is later.
If incidental materials and supplies are kept on hand, the cost of these is deductible at the time of purchase if:
• A record of when they are used is not maintained,
• An inventory of the amount on hand at the beginning and end of the tax year is not kept, and
• Deducting the costs in the year of purchase does not distort income.

Valuing Inventory

The following methods are available for valuing inventory.
Cost method. The cost method values ending inventory with the invoice cost of similar items, plus other direct and indirect costs that are required to be added to inventory. The FIFO cost method takes the invoice price of similar items most recently purchased and applies that price to the quantity of items on hand at the end of the year.
Lower of cost or market method. This method compares the market value of each item on hand with its cost at the time inventory is taken. The lower of the two is the value of inventory. If there is a drop in the current price of items that are similar to items remaining in ending inventory, the cost of goods sold deduction will be higher using the market value rather than cost to value ending inventory. The lower of cost or market method is not allowed for LIFO, or for goods that will be delivered at a fixed price on a firm sales contract.
Retail method. The total retail selling price of goods on hand at the end of the tax year is reduced to approximate cost by using an average markup expressed as a percentage of the total retail selling price.

Goods that cannot be sold. Goods that cannot be sold at normal prices or are unusable in the usual way because of damage, imperfections, shop wear, changes in style, odd or broken lots, or other similar causes should be valued at their bona fide selling price minus direct cost of disposition no matter which method is used to value the rest of the inventory.
Physical inventory. A physical inventory must be taken at reasonable intervals, and the book amount for inventory adjusted to agree with the actual inventory.
Loss of inventory. A casualty or theft loss for inventory that is shoplifted, broken, spoiled, or otherwise lost during the year is taken through the increase in the cost of goods sold deduction. An additional deduction for a casualty or theft loss is not allowed. Any insurance or other reimbursement received for the lost inventory is reported as taxable income.
If the casualty loss is due to a federally declared disaster, the taxpayer can choose to deduct the loss as a casualty loss on the return for the immediately preceding year. If the taxpayer chooses this approach, decrease opening inventory for the year of the loss so the loss will not show up again in inventory.

Uniform Capitalization Rules (UNICAP)

Under the uniform capitalization rules a business must capitalize the direct costs and part of the indirect costs for production or resale activities. For purposes of calculating the cost of inventory, a business subject to UNICAP must add a portion of indirect costs to the direct costs that make up inventory. These costs are then recovered through the cost of goods sold deduction rather than as a current deduction.
Activities subject to UNICAP rules. Any trade or business that:
• Produces real or tangible personal property, or
• Acquires property for resale with average annual gross receipts of more than $26 million (2019).
Note: Exceptions apply.

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Fringe Benefits

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Fringe Benefits

Tax Treatment of Fringe Benefits

The term “fringe benefit” refers to any benefit provided to an employee that is in addition to money. All benefits provided to an employee are taxable unless the law specifically excludes or defers tax on the benefit. Thus, a fringe benefit can either be taxable, tax-deferred, or excluded from taxation.
The personal use of an employer-provided vehicle is an example of a taxable fringe benefit. An employer contribution to a qualified retirement plan on behalf of the employee is an example of a tax-deferred fringe benefit. Employer-provided health insurance for an employee is an example of a tax-free fringe benefit.

Business Owner

A small business owner in a corporate setting may be both the owner and an employee of his or her business. By taking advantage of excludable fringe benefits, the owner receives a double benefit. First, the cost of the benefit is deductible by the business. Second, the cost of the benefit is tax free to the  mployee-owner.

Nondiscrimination Rules for Fringe Benefits
Nondiscrimination rules are designed to prevent business owners from offering tax-favored fringe benefits to themselves but not their employees. In general, if fringe benefits are offered to all employees, then all employees, including the top paid employees, receive tax-favored treatment on employee benefits. However, if a plan favors highly-compensated employees or key employees, the value of the benefit must be included in their taxable wages.

The terms highly compensated employees and key employees can mean different things depending on the applicable plan. Special restrictions apply for fringe benefits for sole proprietors, partners, certain LLC members, and S corporation shareholders. Consult your tax advisor if you are a business owner considering providing fringe benefits to yourself and your employees.

Employer-Provided Vehicles

If an employer provides an employee with a companyowned vehicle, the employer must include the value of any personal use in the employee’s Form W-2 as other compensation. Social Security and Medicare tax must be withheld. Federal income tax withholding is optional if the employee was notified and the value of the benefit is included in boxes 1, 3, 5, and 14 of Form W-2. The employer has several options on how to calculate the value of the benefit.
• General valuation,
• Annual lease value method,
• Cents-per-mile method, and
• Commuting value method.

Employer-Provided Cell Phones

The value of an employer-provided cell phone, provided primarily for noncompensatory business reasons, is excludable from an employee’s income.

Noncompensatory Business Purposes
An employer needs substantial business reasons for providing the cell phone. Examples include:
• Need to contact the employee at all times for workrelated emergencies,

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Fringe Benefits

• Requirement that the employee be available to speak with clients at times when the employee is away from the office, and
• Need to speak with clients located in other time zones at times outside the employee’s normal workday. The value of cell phones provided to promote goodwill, boost morale, or attract prospective employees cannot be excluded from an employee’s wage.

Dependent Care Assistance

Up to $5,000 ($2,500 for Married Filing Separately filing status) of dependent care benefits provided under a dependent care assistance program is excludable from taxable wages. Although these benefits are reported in box 10 of the employee’s Form W-2, they are not taxable if used for providing qualified care. The benefits are reported with the tax return on Form 2441, Child and Dependent Care Expenses. If benefits received are more than the amount that can be excluded, the excess is included as taxable wages on Form 1040. If an employee receives dependent care benefits, it is still possible for the employee to claim a tax credit for additional expenses.

Other Fringe Benefits

Additional fringe benefits for employees may include:
• Use of on-premises athletic facilities.
• Low-value or de minimis benefits.
• Employee discounts.
• Up to $50,000 group-term life insurance.
• Health benefits.

• Certain business-related meals and lodging.
• Moving expenses.*
• Up to $5,250 of educational assistance.
• Transportation benefits.
• Certain benefits provided as a working condition.
* For tax years 2018 through 2025, the qualified moving expense deduction is allowed only for members of the Armed Forces (or their spouses or dependents) on active duty that move because of a military order and incident to a permanent change of station.

Cafeteria Plans

A cafeteria plan allows employees to choose between receiving taxable compensation or a qualified benefit for which the law provides an exclusion from taxation. If the employee chooses the benefit, it is excluded from taxation. Cafeteria plans are sometimes referred to as “flex plans,” “flexible spending arrangements,” or “FSAs.”

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Corporation Meeting Requirements

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Corporation Meeting Requirements

Corporation Meeting Requirements

State corporation law and the corporation’s own bylaws set the rules by which a corporation holds valid meetings, takes valid corporate actions, and keeps corporate minutes. An organization’s legal standing as a corporation is risked if a corporation fails to hold corporate meetings documented by the corporation’s minutes.

Piercing the Corporate Veil
Corporations are often formed for purposes of protecting shareholders from liability. If formalities are not followed, the corporate veil can be easily “pierced” by a court, resulting in personal liability for the shareholders. Lack of adherence to corporate formalities (including holding an annual meeting evidenced by annual minutes) is a primary reason why courts may pierce the corporate veil.

Note: Generally, corporation law varies by state. The general concepts of how to properly call a meeting, give adequate notice, and correctly record corporate actions taken are often the same. However, the specific requirements may vary by state or the corporation’s own bylaws. Therefore, this information is to be used as a basic guideline only, and care should be taken to check compliance with state law and the corporation’s bylaws.

General Requirements for All Corporations
• Meetings need to be held at least annually.
• Give notice of date, time, place of meeting (or retain signed waiver of notice, see reverse) to all shareholders.
• Prepare minutes of the meeting, including the following.
– The name of the corporation.

The date, time, and place where the meeting was held.
– That notice of the meeting had been properly given or waived in accordance with the bylaws.
– Record of shareholders present and absent.
– That the minutes of the previous meeting were presented and approved.
– Any important changes to the business that happened during the year.
– Election of officers (by action of the board of directors) and directors (by vote of the shareholders) according to the corporation’s bylaws and articles of incorporation, if specified that elections should occur annually.
– Any other basic information covered and decisions made.

Single Shareholder
Requirements for meeting minutes are fairly simple for one shareholder corporations, but must still be kept in order to retain corporation status. Use the general requirements as a guideline and also consider the following information.
• Set a date of the meeting (this can be a past date since there is no need to give notice to oneself) to be held at least once annually.
• Record in the minutes, that the meeting is a joint meeting of the shareholders and the board of directors.
• Record in the minutes the election of directors and the election of officers (president, secretary, treasurer) for the next year (if indicated as necessary in the corporate bylaws).
• Sign the minutes as the secretary of the corporation and retain copies with other business documents.

Corporation Meeting Requirements

Two Shareholders
If there are two shareholders, both are on the board of directors and one person is designated as the secretary of the corporation. Use the general requirements as a guideline and also consider the following information.

• Set a date of the annual meeting (if the shareholders meet often, it could be a past date with a signed waiver of notice, see next column) to be held at least once annually.

• Record in the minutes the two shareholders present and that it is a joint meeting of the shareholders and the board of directors.

• Record in the minutes the election of officers (president, secretary, treasurer) and directors for the next year (if indicated as necessary in the corporate bylaws).

• The secretary of the corporation signs the minutes and retains copies with other business documents.

Three or More Shareholders

When there are more than two shareholders, there is greater potential for disagreements. Steps should be taken to ensure that corporate formalities are adhered to so that one individual cannot later contend a meeting (and any decision made at that meeting) was not valid due to inadequate notice or non-attendance. Use the general requirements as a guideline and also consider the following information.

• The president, chair of the board, or secretary calls the meeting and gives adequate notice.

State corporation law and corporation bylaws establish how many days notice must be given for certain types of meetings.

• Set a date of the meeting and give adequate notice of the date, time, and place to all shareholders. Note: State corporation law may allow a valid meeting if all who are entitled to vote attend or if all who do not attend sign a waiver of notice, see next column.

• For a valid meeting, a quorum must be present. The articles of incorporation, bylaws, and state corporation law establish the quorum. Generally, it is a majority of the shares (or directors) entitled to vote.

• Record the type of meeting (meeting of shareholders, meeting of the board of directors, or joint meeting) in the minutes and the shareholders in attendance and absent.

• Record in the minutes any actions taken or resolutions passed and the vote in favor of each.

• Record in the minutes the election of officers (president, secretary, treasurer) and directors for the next year (if indicated as necessary in the corporation bylaws).

• The secretary of the corporation signs the minutes and retains copies with other business documents.

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