 |
Running a Corporation – Shareholders and Directors
Author: SD Lawyer  | Posted: 22-10-2007 | Comments: 0 | Views: 48 | Rating: (61)  (?) 
The corporation is the oldest formal business entity we have. How old? Well, do you really care? It is old. The reason it has been with us for so long is it provides a unique protection for business owners. Simply put, individual owners are not responsible for the debts of the corporation. If a pharmaceutical company that is a corporation puts out a drug that hurts people, the people that have purchased shares in it on the stock exchange cannot be held liable for the resulting judgments.
This liability protection comes with a price. To maintain the protection, the corporation must be run in a formal manner. Meetings must be held, and certain positions must be filled or the entity can be considered a sham. A sham corporation loses the ability to protect its shareholders from liability.
Two of the positions that are key within a corporation are those of shareholders and directors. Most people confuse these two roles, particularly in a small business. This is because a small business that has incorporate may have the same people filling both roles. There are, however, distinct differences.
A shareholder is a person that owns part of the corporation. If I go out and buy 100 shares of Microsoft tomorrow, I am a shareholder and owner of Microsoft. Now, 100 shares are not exactly going to give me a lot of clout given the fact Microsoft has millions of shares, but I am technically an owner. So, can I storm in to the office of the CEO and demand the company put out a particular type of software? Of course, not. I don’t own enough shares to have any such leverage. Even if I did, I could not directly harass the CEO. Ah, but I could do it indirectly through the directors.
Every corporation has a board of directors. This is true for a giant like Microsoft and a tiny small business that has incorporated. The board of directors is responsible for the performance of the business. They set general policy and strategy for the corporation. They do not handle day to day decisions unless they are significant ones. Instead, the board elects officers of the corporation to run the day to day stuff. This includes the CEO.
Every year, the corporation has an annual meeting. At the meeting, the shareholders vote on who will be directors for the next year. If things are going well, the same directors are usually re-elected. If things are going poorly, there can be changes. Regardless, this is how the owners of the corporation, the shareholders, control what is happening. If a majority of shareholders hate the CEO, they can push that officer out by voting in directors that will make a change.
In a small business corporation, the shareholder and director roles can become confused. Simply put, a corporation with three shareholders is not going to have an independent board. Instead, the three shareholders will often also be the three directors. In turn, they will also probably be the elected officers, receptionist, janitor and so on. Regardless, it is important to understand that shareholders own the corporation through their shares while board members guide the general course of the business.
Rate this Article:
Current: 0 / 5 stars - 0 vote(s).
Article Source: http://www.articlesbase.com/management-articles/running-a-corporation-shareholders-and-directors-242437.html
|
Submitting articles has become one of the most popular means of generating quality backlinks and targeted traffic to your website. Join us today - It's Free! |
|
Got a Question? Ask.
Ask the community a question about this article:
Frequently Asked Questions
1. Discuss the reason why one firm could have ...
By: kit | 30-08-2008
1. Discuss the reason why one firm could have positive cash flows and be headed for financial trouble, while another firm wth negative cash flows could actually be in a good financial position.
2. Why would a preferred stockholder want the stock to have a cumulative dividend feature and other protective provisions?
3. Discuss the rationale in holding adequate cash and other non-cash assets.
4. What form of business organization is the most preferred and ?
Using the following criteria, specify the legal ...
By: kit | 30-08-2008
Using the following criteria, specify the legal form of business organization that is favored and why:
a. Organizational requirements and costs
b. liability of the owners
c. Continuing of business
d. Transferability of ownership
e. Management control and regulations
f. Ability to raise capital
g. Incomes taxes
Where can I find updated or accurate contact info of company executives?
By: unique | 29-08-2008
I am a salesperson.How can I find contact details of executives of companies? I am tiered of dealing with inaccurate contact info.
Non-disclosure agreement
By: wildfungi | 29-08-2008
Where can I find someone to invest in my Idea? I'm a Chef 20 yrs stuck in the kitchen. I have invented the next 4~men grill....set it & 4 get it.. (you get the idea)I've done~Market research, Prototype development, Engineered drawings, Patent search and lots more. Please help.
Translation
By: kim | 29-08-2008
cum signum nos defendi what is the translation or defintion of this phrase please!?
Doing business with a dba
By: Dot Fournier | 28-08-2008
To whom should customers make their payment out to when doing business with a DBA? eg. Joe's Cars dba "You Ride It"
Q&A Powered by: 
Latest Management Articles
How to Choose the Right Management Consultant?
By: Editor-123 | 10/10/2008
Often managers face difficulties while selecting services of the right consultant for their respective needs. Choosing the best help from an outsider is a complex process, which requires special skills to ensure the end results. In this article, we'll discuss the main criterion to select a consultant for a growing company.
Should You Conduct Paid Surveys?
By: Ryan J Bell | 10/10/2008
Organizations that conduct surveys can benefit from the valuable information they provide. They can offer unique insight into customer perceptions, market opinions, employee morale, and daily operational issues. Aside from the proper design and execution of a survey, one of the main challenges is getting people to participate. Over the...
Why is it Generating Passive Income is Easy?
By: Trisha Rich | 08/10/2008
Generate passive income and work with your home based business using the advantage of world wide web technology.
Freeze Drying Services: Restoring Your Archives
By: Ben Anton | 08/10/2008
Museums, libraries and other organizations have the important and vital job of preserving historical archives and books for future generations. The best way for institutions like these to prevent document and archive loss is to implement storage techniques that will protect valuable articles against such catastrophes as flood or mold...
No One Wants to Hear They Have an Ugly Baby
By: TLS | 08/10/2008
It’s time to admit you have an, “Ugly Baby!” Or, in distribution terminology, “Admit your warehouse is in shambles!” If your warehouse has returns that sit around for days without being processed, “Your warehouse is in shambles.” If your warehouse has receiving that does not get received for days, then once it is received it sits again before it is put away, “Your warehouse is in shambles!”
Business Plans For Tough Times-5 Keys to Success
By: Maryann Shank | 08/10/2008
Do existing businesses need money? Probably.
Is this a time to start a business? Maybe.
In either case, the business plan you write today will be different than the one you wrote five years ago. Five years ago money was available. It is still there, but it is a lot harder to...
Service, Thy Name is Customer
By: Richard Laermer | 08/10/2008
Hello to you, the service person.
Yes, sure, we are all about service. It’s a funny word that has had more than a few crazy meanings. When someone says “I’m servicing” another, I immediately think something dirty.
Sorry, Big Doesn't Get the Job Done
By: Richard Laermer | 08/10/2008
The CEO of a fast-growing Web company recently asked me why he should hire RLM PR, an 18-person firm, instead of a so-called name firm. Having been in a self-owned service business for 17 years, I was confused by this query. What's a name? Never one to say "no" to a challenge, I am herewith answering him in public.
More from SD Lawyer
Selling Corporate Shares – be Careful
By: SD Lawyer | 22/10/2007 | Business
One of the touted advantages of owning a corporation is the ease in transferring shares. In many cases, this assumed benefit is simply wrong.
Should you Start a Business With a Friend?
By: SD Lawyer | 22/10/2007 | Business
Starting a business is a scary and exciting time. It takes a leap of faith, but also offers up the hope of successfully doing something you love. Still, there are things to be wary of.
Checklist for Going Into Business for yourself
By: SD Lawyer | 22/10/2007 | Business
If you are considering going into business for yourself, it makes absolute sense to be as prepared as possible. Here is a checklist of things you need to consider.
Avoid Common Business Start-up Mistakes
By: SD Lawyer | 22/10/2007 | Business
If you are considering starting up a business, you are facing both an exciting and stressful time. To succeed, you should avoid the common mistakes many new business owners make.
A Key Step for New Business Owners
By: SD Lawyer | 22/10/2007 | Business
Many a guru has opined on the keys to business success. While everyone has an opinion, I am going to focus on a more practical step you can take that will make a big difference.
What are Professional Corporations?
By: SD Lawyer | 22/10/2007 | Business
Many professionals are barred from forming limited liability companies or basic corporations for their practices. Instead, there only option is often to form a professional corporation.
Free and Low Cost Pc Offers – the Catch
By: SD Lawyer | 22/10/2007 | Computers
You've probably seen the ads for "low cost" PC's - "PC's for $199" - or even "free" computers. If you're in the market for a personal computer, you should know "free" doesn't always mean free. Very often, certain conditions and restrictions found in the fine print of advertisements for "free" or "low cost" PC's can turn a so-called deal into an expensive purchase.
Resolve Disputes With your Partners Before They Happen
By: SD Lawyer | 22/10/2007 | Management
A majority of businesses have ownership groups of less than five individuals. While this provides for efficient and effective management, difficulties arise when something happens to one of the owners.
|
|
Business 
