Small Corporate Trick: Consent to Action without Formal Meeting


Many small businesses that are on the fence of whether to form a corporation or an LLC decide to form an LLC because it’s easier and requires less upkeep. And while it is true that there are additional formalities associated with incorporation, they needn’t be overly burdensome for the small company without tremendous resources.

One of the main critiques of the corporate entity is the requirement to hold annual meetings of the board of directors and shareholders. This isn’t that bad for a number of reasons. First, it’s not that hard to hold a meeting once a year. Second, if you don’t want to hold a meeting, assuming everyone involved agrees, you can do everything you need to do without holding a formal meeting.

Here’s how: If you have an item that needs to be approved, and every shareholder or board member agrees, you can skip the formal meeting by signing a “Consent to Action without Formal Meeting of the [fill in the blank].” This a handy tool when there are board members and shareholders spread across multiple states and everyone is on the same page. But remember, this document has to be signed by every constituent member of the organization that approves it. If one person does not consent, you have to keep with the formalities.

Corporations document their important actions in meeting minutes in their resolutions, which is just another name for a decision made by the corporation. In each meeting, a corporation can resolve to do as many or as few things as it chooses, in accordance with applicable state and federal laws.

What’s important to remember is this: Document that you are following the following the law in obtaining board and shareholder approval when necessary and maintain those documents in the minutes of the corporation. For a small company with a handful of shareholders, that doesn’t have to be a complicated process.

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