Maintaining Business/Corporate Records: Obligations and Considerations

For almost 20 years, Jacko Law Group has provided a comprehensive range of services for firms focused on success, from entity formation to exit planning and everything in between.

Each step in business growth is exciting but carries the potential risk of violating regulatory requirements, especially in updating records.

Maintaining corporate records is one such area that requires periodic attention for both established entities and newly created businesses. The key obligations for maintaining corporate records that meet requirements are:

For Existing Businesses

Already established firms are required to maintain up-to-date records. This is critical for transactions, responding to due diligence requests, and demonstrating compliance during regulatory exams.

• Corporate Records: Corporations are required to hold annual shareholder meetings, as well as annual meetings of the board of directors, to establish any material changes to the business, board, and officers. Corporate records must be updated at least annually to reflect any changes.
• Bylaws, Operating Agreements, or Partnership Agreements: Governing documents that reflect agreements, bylaws, and how the business is run must be updated as material changes occur.
• Stock Certificates: A stock ledger must be maintained to reflect current distribution of stock and ownership percentages. Stock certificates must be delivered and documented.
• Blue Sky and Other Required Filings: Firms that sell securities must comply with both federal and state regulations where those securities are offered and sold, and must complete necessary filings, including any exemptions. Required filings depend heavily on the state’s requirements (multiple filings may be required if securities are sold in more than one state), the fund type, and the offering structure.
• Statement of Information: California entities are required to file a Statement of Information, which is a periodic disclosure that includes information such as current officers or directors (corporations) or managers/members (LLCs), business address, business description, and any other updates. Corporations are required to file this at least annually, while LLCs can file every two years. California entities should also file a Statement of Information when material changes occur, including a change in agent for service of process.

For New Entities

Transitioning advisers forming new RIAs, newly merged or acquired firms requiring a new structure, firms undergoing material restructuring, and brand-new businesses have several foundational obligations that come with forming a new entity. California-based businesses must:

• Submit Articles of Organization (for LLCs) or Articles of Incorporation (for Corporations) to the California Secretary of State. This is a one-time obligation and does not require re-submission unless material changes occur to the entity’s structure or operations.
• Obtain an Employer Identification Number (EIN), which is required for federal tax administration purposes.
• Submit Statement of Information within 90-days of formation.
• Prepare Organizational Documents and Agreements to provide a blueprint for the business. Please note that the entity structure will determine the type of organizational documents needed and how often those should be updated.

Establishing and maintaining business or corporate records is an ongoing commitment to preserving business objectives and meeting regulatory requirements.

Jacko Law Group works with businesses in all stages of their life cycle to not only establish strong entity structures, but also to protect business longevity and success and help ensure the entity meets its regulatory obligations.

For assistance with strengthening your corporate records program, or if you are in the process of an M&A, transitioning to an independent RIA, or restructuring your business, contact us at 619.298.2880 or email [email protected] for assistance.