Frequently Asked Questions (Corporations)
Below are some of the most often asked questions about SmallBiZ Secretary and corporations.
General Secretary Questions
What is SmallBiZ Secretary?
SmallBiZ Secretary for Corporations is a new tool which assists small & medium corporations with initial and ongoing state compliance actions necessary to keep a corporation compliant.
Why is This Important?
If a corporation becomes non-compliant, the stockholders of the entity will no longer be able to enjoy the tax and liability benefits provided by their entity.
How Big of a Problem is Compliance?
A SmallBiZ.com survey of one year old corporations found more than 8 out of every 10 corporations were not compliant.
How Does SmallBiZ Secretary Work?
SmallBiZ Secretary monitors each subscriber's corporation and notifies subscriber, by email, of each upcoming "compliance event". SmallBiZ Secretary then helps each subscriber complete a compliance event quickly & easily. SmallBiZ Secretary and even completes most (and in many cases all) required filing and internal paperwork.
What is Meant by Compliance?
Every corporation, with few exceptions, must take care of initial and ongoing compliance actions: hold an organizational meeting, elect officers, adopt bylaws, issue stock, hold annual meetings, document all major actions in writing, complete annual state filings, and more. If your corporation does not do all of these things, in a timely manner, it is not compliant.
What Else Does SmallBiZ Secretary Do?
Unique features, such as SmallBiZ Secretary?s Compliance Monitor informs each subscriber whether their corporation is ?Compliant? or ?Not Compliant?. When a corporation is ?Not Compliant?, an email warning is sent to the subscriber, providing the steps needed to bring the corporation back into compliance. In effect, it is watching 24/7 to make sure a subscriber?s corporation stays compliant.
How Do I Access SmallBiZ Secretary and its Tools?
Subscribers can login to http://www.smallbiz.com/secretary/, where they will see their corporation?s compliance status, a calendar of upcoming compliance events, and all incomplete actions yet to be taken. Subscribers also have access to a history of all completed actions, a current printable listing of stock holders, as well as use of thousands of state, federal, and general business forms.
Available for LLCs?
SmallBiZ Secretary is only offered for For-Profit Corporations. We will offer SmallBiZ Secretary for LLCs sometime later this year.
Using SmallBiZ Secretary
If you are unsure what to do first, second, etc., read & review Instructions for Completing Your Initial Actions. If you go to Smallbiz Secretary and you see a "Temporary" page with a link to Completing your Initial Actions & a link to Answering your Initial Actions, you will need to answer your Initial Actions Questions BEFORE you can start using SmallBiZ Secretary.
What if my Corporation is "NOT Compliant"?
At any time you are on the SmallBiZ Secretary home page, check to see if your corporation is "Compliant" or "Not Compliant". If your corporation is not compliant then, it means there are one or more Actions that are overdue by your corporation. To complete these Actions and bring your corporation back into compliance, click on the "CLICK HERE to fix" link or on the "Incomplete/Open Action(s)" link and complete each Action. When all Incomplete/Open Actions are "completed", then your corporation will be "Compliant" again.
What if I Need to Take Another Action?
Any corporate action, which will seriously affect (positively or negatively) your corporation, generally requires the board of directors to meet and vote on the action.
Examples of Actions Requiring Director Approval?
- Borrowing money
- Loaning Corporate money to others
- Issuing a bonus
- Starting a profit sharing plan
- Hiring an executive
- Firing and Officer
- Adding an Officer
- Leasing another office location
- Purchasing a large amount of or expensive Equipment
- Issuing stock (from treasury stock)
So, How Do I Take Action in These Cases?
Find the Action you wish to take by choosing "Take Action" on the HOME page or "Hold a Special Directors Meeting."
Do All Actions Require Such Formality?
No! Only major decisions require the formality of getting a a vote of the Director(s) and sometimes Shareholder(s). Ongoing, day-to-day corporate actions can be taken by the Officers of the corporation and generally don't need approval of Director(s) or Shareholder(s). Check your corporation's bylaws for more details.
I'm Still not Sure?
IF you're not sure, but think you might need to take formal Action, we recommend that your choose one of the Actions in Take Action.
I Can't Find The Action I Want - What Now?
If you cannot find the Action your corporation needs to take next, choose "Hold Special Directors Meeting" and if necessary, "Hold Special Shareholders Meeting" and follow Secretary's suggestions.
Answering Your Initial Questions
Can Officers be the Same Person?
You can have one person occupy all the officer roles. So, one person can be the President, Secretary & Treasurer.
Do I need to do "Obtain Sub S Election"
Even though Obtain Sub S Election is one of your Initial Actions, your corporation needs to follow this Action ONLY if it wishes to be a Sub S corporation. If you wish to have your corporation be taxed as a regualar or C corporation, you do not have to follow this Action. Simply mark each Task as complete.
Do I Need Stock? What is it?
Every "for profit" corporation must issue stock to the owners (stockholders) whether there is only one owner or thousands. Stock is like the title of the company. So, not having stock would be like not having a title you your automobile. However, with stock, a corporation can slice up (devide) ownership to many people.
What do all those stock terms mean? Below are some terms you will see often, which are linked to a detailed definition. Become familiar with the following terms BEFORE reading further or issuing your stock:
How many shares do I issue?
Your corporation can issue as many shares as it is authorized to do so. This amount of "authorized stock" is declaired in your articles of incorporation. Your corporation CANNOT issue more shares than it is authorized. Each share issued represents another slice of the company being given/sold to a shockholder (AKA shareholder). The total number of issued shares of stock are called the "outstanding" shares and represent all the slices given out. In other words all outstanding stock = 100% of the ownership of the corporation (regardless of the number of authorized shares of stock).
EXAMPLE: XYZ, Inc. is authorized to issue 1000 shares of stock. It issues 100 shares to 4 initial stockholders. There are now 100 shares of outstanding stock (AKA: total issued stock). Yet, the corporation has the authority to issue 900 more shares (AKA: company stock). Additionally, if each shareholder holds 25 shares, they then each own 25% of the corporation (25 shares compared to 100 outstanding). If the corporation raises money by issuing 100 more shares for say $100,000 more (to the corporation), there would now be 200 shares outstanding and 800 left in company stock for issue. Additionally, each of the original four shareholders now own only 12.5% of the corporation as the additional shares issued diluted their ownership by 50%.
What if I have a Close Corp.?
If your corporation is a close corporation, as defined by your state's statutes, then many of the basic compliance requirements SmallBiZ Secretary will suggest don't apply to your corporation. However, following the suggested Actions will not harm your corporation and in fact will only strengthen your corporation's structure and your argument that your corporation is separate from you personally.
What if I haven't completed any meetings since starting the corporation?
Because we don't have a time machine, we cannot go back to the beginning and completely solve our corporate compliance messes with a few simple actions. However, all is not lost.
Most corporation owners have operated their corporations without formally taking care of their initial or annual meeting formalities. However, with the initial formalities, often, there was an 'unofficial' meeting where officers were decided, stock was distributed, and so on; but there was no formality to it and nothing was documented. What most do at this point is complete the formality of documenting what happened unofficially. That is, they go ahead and set up on paper, all the required meetings (by completing the Actions listed by SmallBiZ Secretary), to show compliance effectively right before beginning operations (but not before the corporation's formation or filing date). In most cases, they estimate the date and time that they 'unofficially' took these actions.
Then, when it comes to the annual meetings, because they most likely didn't take place (even though maybe they should have), they can hold their Annual Directors Meeting & Annual Shareholders Meeting right away. At the annual meetings, all business that has taken place will be accepted. Be sure to provide proper notice to all parties of each meeting and document everything. Again, SmallBiZ Secretary will help you through the whole process.
This formality fix-up is of course not perfect, but it will work good enough for most courts. The idea here is you want to separate your self personally from your corporation. The more formality followed by your corporation, the better your argument is that you and your corporation are not the same.