It is common to see small businesses who want to switch from a sole proprietor to a corporation, eventually, do the “minimum”, meaning only filing an Articles of Incorporation and leaving preparation of Minute Book for some indefinite future time to come, if at all.
It is extremely important to comprehend that Minute Book is not optional but a mandatory requirement. Failing to comply with the requirement to have an up-to-date Minute Book can bring about penalties such as substantial fines and even imprisonment.
Also, a lack of a Minute Book can have material tax implications. Take, for example, a situation when a sole shareholder pays himself a dividend or receives a loan from his/her corporation. Without an up-to-date Minute Book, the CRA will likely consider those monies as a personal income, and the corporation won’t be able to deduct such a loan as an expense.
Finally, as we have already noted, Minute Book serves as evidence in court to a wide variety of transactions, rights, and obligations of the parties involved and thus it can prevent conflicts and help to avoid costly litigation.
Thus far, we hope our readers, small business owners planning to incorporate will also have and maintain a Minute Book. But what can be done if a corporation has already been operating for a few years completely without or with partial and outdated Minute Book? The law allows a self-help remedy of rectification of Minute Book post factum, provided that the information is a true and accurate reflection of the company’s business.
It should be noted that depending on the length of existence and complexity of the corporation, the rectification of a Minute Book is usually a complicated and over-detailed process. It requires restoration and documentation of all material transactions, dividends, loans, etc. Luckily, with the professional help of a lawyer, this process can be done fast, professionally, and in compliance with the requirements of the applicable law.
If need help in bringing your corporate business in compliance with the law, please contact Buzaker Law Firm via email at email@example.com or call 905-370-0484.
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