Hold Your Family Board Meeting by Year-End!

Mark J Kohler

19,620 views • 9 months ago Save 21 min 5 min read

Video Summary

This video delves into the crucial practice of holding family board meetings for business owners, emphasizing its benefits beyond mere compliance. It explains that these meetings, regardless of business structure (LLC or corporation), serve as vital documentation for legal and tax purposes, potentially preventing the piercing of the corporate veil and aiding in IRS audits. A surprising benefit highlighted is the ability to write off expenses associated with these meetings, including travel and meals, effectively making them tax-deductible events.

The discussion also stresses the personal growth aspects, fostering family unity, educating younger generations about finances, and establishing a clear business vision and continuity plan. The speakers offer a practical, accessible approach, suggesting that attendees can be as informal as those invited to Thanksgiving dinner, making the process less daunting. One particularly interesting fact is that these meetings can be documented on a single sheet of paper and are essential for maintaining an entity's good standing with the state, preventing involuntary dissolution.

Short Highlights

Holding family board meetings is crucial for business owners to ensure asset protection and IRS audit-proofing.
Expenses incurred for these meetings, including travel and lodging for board members, can be tax-deductible.
These meetings provide a platform for educating family members about business finances and fostering unity.
Documenting these meetings, even on a single sheet of paper, is essential for legal compliance and can prevent involuntary dissolution of an entity.
The annual cost for a company compliance service to help with minutes and renewals is $200.

Key Details

The Thanksgiving Dinner Test for Board Members [0:04]

The easiest way to determine who should be on your board of directors is to ask: "Who would you invite to Thanksgiving dinner?"
These are the people closest to you, your trusted circle.
However, the video humorously notes that family members like "Uncle Eddie" might be Thanksgiving guests but not necessarily advisors.

The Importance of Family Board Meetings [0:40]

Family board meetings are presented as a passion project for business owners.
They are critical for asset protection, tax planning, business growth, and future planning.
The video aims to cover seven direct and indirect benefits of this process.

Defining a Family Board Meeting [1:19]

A family board meeting is a meeting held by a business owner regarding their business.
For LLCs and corporations, it serves as the annual meeting, documenting important business decisions and ensuring compliance.
This process helps create separation between the individual and the business entity.

Benefits Beyond Compliance: Tax Write-offs [2:04]

The documented meeting can be part of your corporate book and is not submitted to the IRS or state.
A key benefit is the ability to write off expenses related to the meeting, such as travel for board members, accommodation, and food.
This makes the entire event a tax-deductible occasion.

Legal Ramifications: When Minutes Matter [4:07]

Minutes from these meetings may be required during an IRS audit or in the event of a lawsuit against the company.
Plaintiff lawyers request these minutes to determine if the company has been treated as a separate entity or as a personal bank account.
They are also requested for business sales or SBA loans.

Choosing Board Members: Advisors vs. Directors [7:33]

Corporations have formal boards of directors, often including spouses or adult children, documented in corporate setup.
LLCs can have a "board of advisors" who provide input and advice but do not have statutory authority like directors.
The "Thanksgiving dinner" analogy is reiterated for selecting these trusted advisors.

Asset Protection: The Corporate Veil [10:31]

Holding regular meetings and documenting them is a key factor in preventing "piercing the corporate veil."
This legal protection ensures that if the company is sued, your personal assets remain separate and unaffected.
Minutes demonstrate that the business was treated as a distinct entity with separate finances and operations.

IRS Audit Proofing and Accountable Reimbursements [12:49]

The IRS requires "accountable provisions" to be documented, often within company minutes.
Examples include home office reimbursements, auto expenses, and the "de minimis" provision for immediate expensing of items under $1,500.
Having these provisions in minutes is crucial for substantiating tax deductions during an audit.

Fostering Family Unity and Education [14:17]

For entrepreneurs, business can be lonely; these meetings provide a focused conversation with invested family members.
It's an opportunity to educate children (even under 18) about money, debt, and financial struggles, applying these lessons to their personal lives.
Many children are eager to participate and learn, often surprising parents with their engagement.

Business Continuity and Succession Planning [17:25]

These meetings help establish the long-term vision and continuity of the business.
Involving family members in these discussions ensures they understand the business operations and challenges, facilitating a smoother transition.
This can address the common challenge of next-generation succession when children lack exposure to the business.

The Family Office Concept [21:19]

Wealthy individuals often have institutional family offices; these meetings help small business owners create their own.
The discussions, the people involved, and the strategic planning turn your business into a "family office."
This provides support, advice, and a clear plan for the upcoming year, with family accountability.

The Seven Benefits Summarized [23:41]

1. Company Compliance: Ensures the entity remains in good standing with the state.
2. Better Asset Protection: Safeguards personal assets from lawsuits.
3. IRS Audit Proofing: Substantiates tax write-offs with documented provisions.
4. Family Unity, Vision, Education: Brings family together, educates, and aligns vision.
5. Tax Deduction: Makes travel, accommodation, and dining expenses deductible.
6. Business Continuation Planning: Documents wishes and prepares family for succession.
7. Support and Accountability: Provides advice, support, and holds the owner accountable for plans.

Kick them off the board if you don't like them.