April 15th is right around the corner. Hopefully most of you realize the deadline associated with that date and have been working on getting your income taxes prepared and filed. If not, please file for an automatic extension. It is quick and easy to do and will save you a lot of money later on down the road.
But enough has been written on filing income taxes. In fact, there is so much media frenzy around the April 15th deadline that you would have to be living in a cave to miss it.
There are however other deadlines that are just as important but do not get anywhere near as much attention. Some get no attention at all. You just have to remember that they are there. Because of this they can be very easy to overlook or forget. And if you miss them, they can potentially be just as financially detrimental as not filing your income tax returns.
So what are these deadlines? I’ll get to that. But first we need to back up a bit.
Many real estate investors when they first started out bought into the idea that they needed some kind of corporate structure to successfully run their business. You really do not, but many people thought so, myself included. So we set up either and LLC or an S corporation. People like these business structures for all kinds of reasons including professional appearance, asset protection and anonymity. The thing that people often forget is that you can just set up these entities and forget about them. They have to be maintained every year. And that is where these deadlines come into play.
The first deadline will usually be set by the state you are registered in. Mine are in Tennessee, yours could be in Wyoming, Nevada, Delaware, Florida, or even off shore. Your state will want some form of annual filing and fee to keep your entity active. They will likely send you some kind of notice for this but you have to remember to fill in the blanks, write the check and send it in. If you fail to do so, your entity will be decertified by the local Secretary of State and will cease to exist. If that happens, that corporate shield you thought you had in place to protect you will be gone. All because you forgot a deadline.
The other deadline that those of us with entities need to remember and keep up with is the requirement for annual meetings. You are generally required to have some type of annual shareholders meeting and perhaps elect corporate officers or conduct some other type of business. Minutes of these meetings should be recorded and kept in a safe and secure place with your other corporate documents.
When you have these meetings does not really matter. You can have them on Christmas Day if you want to, but you do have to have them. What happens if you do not? Your entity could be declared null and void.
How?
Say someone slips and falls at one of your properties and sues you personally. You state the corporate shield argument and say the property is owned by an LLC and you can’t be held personally responsible. The layer for the plaintiff then subpoenas your corporate record book, you know, the one with all of your minutes. If those minutes are not there and in proper order, the judge may pierce your shield and put everything on your personally.
So, if you have a LLC or S corporation, put a reminder in your smart phone to have an annual corporate meeting and to complete required paperwork. You went through all that trouble to set it up, remember to maintain it. Don’t wait until it is too late.
Good stuff Kevin
Thanks Joe!