Documenting Corporate Decisions
Keep adequate records and minutes of meetings to protect your corporate status.
As the owner of a corporation, you are required to hold shareholders' and directors' meetings, maintain corporate records, and document major corporate decisions. If you neglect these formalities and your business runs into legal trouble, a court may decide to disregard your corporate status -- and hold you personally responsible for the corporation's debts.
The good news is that many states have streamlined the procedures for operating a small corporation, permitting owners to make decisions quickly, without jumping through needless procedural hoops.
Who Makes Corporate Decisions?
To understand the corporate decision-making process, let's look at the different legal roles people traditionally play in a corporation: shareholder, director, officer, and employee. As we consider these roles, keep in mind that you can set up a corporation in which one or two people play all of them.
Shareholders
Shareholders own stock (called shares or ownership interests) in the corporation. Shareholders have the exclusive right to:
- elect and remove directors
- amend the articles of incorporation and bylaws
- approve the sale of all or substantially all of the corporate assets
- approve mergers and reorganizations, and
- dissolve the corporation.
State laws typically require the shareholders to hold an annual meeting. However, many states allow shareholders to do this through a "written consent" or "consent resolution" -- a document signed by all of the shareholders -- instead of a face-to-face meeting.
Directors
The board of directors sets policy for the corporation and makes major financial decisions. Among other things, the directors:
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