Board of Directors of a Corporation

A corporation must have a Board of Directors, which is charged with the overall responsibilities for the corporation. The state in which you incorporate will determine how many directors must be on the Board. In many states, this may be only one person if you have only one shareholder. Some

The shareholders appoint the Board of Directors, which can, and often will, include some of the shareholders. In small businesses the owner may be the sole director. Sometimes, however, as a corporation grows, it becomes advantageous to bring in an additional director, or directors, to present other opinions and expertise on business matters.

The role of the Board of Directors is to manage the corporation. This will likely include establishing policies which the business will follow, and making major business decisions such as:

Establishing and amending bylaws;

Issuing dividends;

Approving major contracts or mergers;

Making key decisions regarding real estate owned or managed by the corporation;

Electing or appointing officers.

Most often the Board does not handle the day-to-day activities of the business, but leaves that responsibility to the officers of the corporation. The bylaws in each state set the parameters, which must be followed by the Board of Directors. Generally, this will include:

Board of Director meetings held quarterly or monthly;

Recorded minutes from each meeting.

Meeting minutes must be accurate and reflect the work done by the Board, which is expected to act responsibly and make decisions that are in the best interest of the corporation. While each state will mandate that an annual board meeting be held, this does not preclude the Board from holding additional, special meetings as deemed necessary.

The first Board of Directors meeting should include:

Approving the corporate bylaws;

Establishing procedures, including record-keeping;

Deciding on the corporation’s fiscal year;

Selecting or appointing the corporate officers;

Electing S Corporation status if appropriate;

Authorizing the sale of stock.

Additionally, a stock certificate should be drawn up in advance to be accepted as the official corporate certificate at this first meeting. Stock certificates should then be issued.

Board members are required to act in a prudent manner on behalf of the corporation’s best interests. The Board must also act cautiously in managing the affairs of the corporation, and no Board member should put his or her personal interests ahead of those of the corporation. All Board actions should be documented to show that corporate business was conducted responsibly. Even if the Board consists of only one director, all activities should be carefully and accurately documented.

For more information, read Ongoing Actions by the Board of Directors of a Corporation. And see Board Resolutions for kits of corporate forms useful to the daily work of Boards of Directors.