Roles and Responsibilities in The Corporate Structure

What often attracts investors to work with an incorporation is the corporate structure because a corporation offers legal liability protection. The corporate structure is quite formal with very specific roles and responsibilities within the system. In order to understand how to set up and operate a corporation, it is important to understand these roles.

Generally, large corporations have much more defined roles where as smaller corporations are more likely to blur the lines between each role. Below is an overview of the different positions that can exist within a corporate structure.

Shareholders

Shareholders are the owners of the corporation and either own all or part of the stock of the corporation. Shareholders will elect the Board of Directors, which is a body that oversees all operations of the company. Shareholders have the responsibility of approving sales of corporate assets, approve mergers, and amend bylaws and articles of incorporation. They have the power to remove directors from the board and dissolve the corporation. Majority of states require shareholders to have meetings annually and reports of these meetings must be kept on file.

Board of Directors

The overall responsibility of a corporation is handled by the Board of Directors. Every corporation has a set number of directors, which is stated in the articles of incorporation. Some states require one director while others require at least three. The main role of a director is to manage the company and make policy decisions. Directors also give direction and elect officers such as the CEO, vice president, treasurer and so on. The Board of Directors will authorize the issuance of stock and take action on other company matters. In smaller companies, the directors, shareholders and officers may all be the same people.

Corporate Officers

The Board of Directors will elect and appoint officers for the company. Officers are responsible for the daily operation of the corporation. There is usually a president, vice president, secretary and chief financial officer in a corporation. The president is referred to as the chief operating officer (COO) and is responsible for day-to-day operations of the company. The secretary handles corporate records while the chief financial officer is responsible for finances.

Employees

A corporation will also have employees which range in positions from managers, supervisors, designers, creative directors, receptionists, ITs, developers, marketing specialists, editors and so on. Employees are hired into the corporation and receive compensation in the form of salaries and benefits.

Filing the Articles of Incorporation

Incorporating a business is a complex process that involves several steps and legal procedures. Corporations must follow state laws in order to operate properly. To incorporate a business, the shareholders will file the Articles of Incorporation which document the name of the corporation, the purpose, tax status, and the place of business. They will also declare who the Incorporators are and the number and type of shares of stock to be held by the shareholders. A corporate must be authorized under state law in order to issue a set number of shares of stock. The Articles of Incorporation must be filed with the state agency and there is a filing fee which varies depending on the state.

Preparing Corporate Bylaws

Once the Articles of Incorporation are filed, shareholders must prepare corporate bylaws which declare the rules of the corporation under the state's laws. The bylaws allow owners of the corporation to add in rules as necessary. The bylaws will indicate the number of directors on the board, rules of director and shareholder meetings, the rules for governing voting procedures.

Board of Directors Meeting

States require the first Directors meeting to be recorded along with any future board meetings. The first meeting is very important as it highlights the responsibilities of the board regarding policy making and decisions. The board will also authorize the issuance of corporate stock during the first meeting. A Notice of Stock Issuance must be filed with the Department of Corporations. Shareholders will receive stock certificates and will begin to prepare documentation for stocks.