top of page
Search

Understanding Corporate Management: Who Is Really in Charge?


Generally, when dealing with smaller corporations such as family-owned corporations, it is not unusual to find that the lines between these three leadership tiers are blurred. In the most basic corporations, you may have a single shareholder and a director. In some states, state law mandates a minimum number of directors. Whether the corporation is privately or publicly held is another factor that distinguishes how these structures interact.


Corporate structure is based on state law requirements and your desires as a corporate owner (also known as a shareholder). The unique feature of a corporation’s structure is the clear demarcation between ownership and management. The basic form of corporate governance involves three tiers of leadership: (1) shareholders, (2) a board of directors, and (3) officers or executives.


Shareholders

Shareholders are the owners of a corporation. They are not involved in the day-to-day operations of the corporation but are integral to determining the business’s purpose. As the owners of the company, the shareholders are required to conduct at least one annual meeting. The bylaws, created and ratified shortly after formation, determine the shareholders’ and directors’ voting structure. Shareholders should also create a document called a shareholders’ agreement. Shareholders’ agreements outline specific rights and responsibilities the shareholders have to each other and to the corporation. These agreements can also include buy-sell provisions, which are rules and limitations regarding the transfer of their interests. Your shareholders’ agreement should also contemplate what should occur in instances of death, disability, divorce, bankruptcy, and other disruptive life events that could impact the ownership of the corporation.


Board of Directors

The shareholders of the company elect the board of directors, which ensures that the shareholders’ vision is appropriately executed. The board of directors is not involved in the day-to-day actions of the business; however, the directors provide critical oversight. One key trait of the board of directors is that the directors owe fiduciary duties to the corporation and the shareholders. The duties owed are the duty of care, which requires them to exercise care in their deliberations and decisions, and the duty of loyalty, which requires them to make decisions in the corporation's best interests. As you consider the selection of your board of directors, keep the following points in mind:

  • It is advisable to select an odd number of people to serve on your board of directors to avoid deadlocks in voting.

  • The people elected as directors will oversee those appointed as officers, so it is critical to consider individuals who can be entrusted to make significant decisions and lead others.


Executive Officers

The next tier of leadership is the executive officers, appointed by the board of directors. This group includes the president, vice president, treasurer, and c-suite executives like the chief executive officer, chief operations officer, or a combination of the two. Some states mandate that every corporation have a president and a treasurer to form the corporation. These executives are in charge of the business’s daily operations.


Next Steps

If you are considering using a corporate structure for your business, Summa Businesss Law can help. Utah business attorney Paul Sparks can explain the available options so that you can make a well-informed decision. Call Summa Business Law to schedule an appointment.





Komentarze


DISCLAIMER: The information contained on this website is provided for informational purposes only and should not be construed as legal advice on any matter. The transmission and receipt of information contained on this website, in whole or in part, or communication with Summa Business Law via the Internet or e-mail through this website does not constitute or create an attorney-client relationship between Summa Business Law and any recipient. You should not send Summa Business Law any confidential information in response to this website. A response will not create an attorney-client relationship, and whatever you disclose to Summa Business Law will not be privileged or confidential unless Summa Business Law has agreed to act as your legal counsel, and you have executed a written engagement agreement with Summa Business Law. The material on this website may not reflect the most current legal developments. The content and interpretation of the law addressed on this website is subject to revision. Summa Business Law disclaims all liability in respect to actions taken or not taken based on any or all the contents of this site to the fullest extent permitted by law. Do not act or refrain from acting upon this information without seeking professional legal counsel.NO GUARANTEE OF RESULTS: The practice summaries and individual attorney biography on this website describe results obtained in matters handled for Summa Business Law clients. These descriptions are meant only to provide information about the activities and experience of our attorney.  They are not intended as a guarantee that the same or similar results can be obtained in every matter undertaken by our attorney; and you should not assume that a similar result can be obtained in a legal matter of interest to you. The outcome of a particular matter can depend on a variety of factors—including the specific factual and legal circumstances, the ability of opposing counsel, and, often, unexpected developments beyond the control of any client or attorney.THIRD-PARTY WEBSITES: As a convenience, this website may provide links to third-party websites. These linked websites are not under the control of Summa Business Law, and Summa Business Law assumes no responsibility for the accuracy of the contents of these websites.

Utah and Arizona

(480) 335-6170

Email: paul@summabusinesslaw.com

©2024 by Summa Business Law, LLC

bottom of page