Running the Corporation, Who is the boss?
In this section we will discuss the different roles of the organization members, the shareholders, directors, officers, and employees.
Shareholders
The people who own stock in the corporation, these people can:
- Approve the dissolution of the organization
- Modify the articles of incorporation and regulations
- Support merger and reorganizations
- Appoint or remove the board of directors
- Consent to the sale the corporate assets
Directors
Directors make financial and policy decisions for the corporation; they can:
- Authorize financing for the corporation
- Determine how to manage real estate owned by the corporation
- Determine officer and key employee wages
- Approve the issuance and distribution of stock
- Choose corporate officers
Officers
Officers are responsible for the administration of the daily operations of the corporation. The president is in charge of operations, the secretary manages and keeps the records, and the treasurer manages the finances.
Employees
In many small organizations, the owners are the employees of the corporation because they receive most of their financial benefits through salary and other compensation. The employees put into action all management decisions.
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With the LLC the owners get all the profits of the business unless they choose to be taxed as a corporation. Any money the company makes is passed on to the owners. The LLC does not pay taxes on the profits but the owners who "actively take part" in the management of the business will need to pay self-employment taxes (Social Security & Medicare) and income tax. This can get confusing so you should speak with your acountant about the above scenario. |
The Minutes of the Corporation and Documenting Important decisions
You should have written minutes for occasions when there is a board of directors' meeting or shareholders participation. Documenting all these key decisions in written minutes will allow you to protect your limited liability status because you will have documentation available if creditors, the courts, or the IRS questions management decisions.
Keep written minutes for:
- Formal proceedings and meetings between shareholders and directors.
- Real estate property deals.
- Deciding on long term leases.
- Stock issuance.
- Authorization of a loan.
- Implementation of a retirement plan or stock option.
- Making important tax decisions.
Documenting all these key decisions in written minutes will allow you to protect your limited liability status because you will have documentation available if creditors, the courts or the IRS question management decisions.
For more information about changing a corporation into an S-Corporation proceed to the next section. The S-Coporation
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