Corporate minutes should be used to record every corporate decision. There are different legal roles people traditionally play in the corporate decision-making process: shareholder, director, officer, and employee. For many small businesses the corporation is organized with only one or two owners playing all the roles.
Some decisions, referred to as corporate resolutions, require that both shareholders and the board members vote on them and the outcome of the vote is noted in corporate minutes. The rules governing corporate resolutions are fixed by state law. If these rules are not followed, the intended results from the resolutions are not valid.
Shareholders own stock (often referred to as 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
- Dissolve the corporation
State laws typically require the shareholders to hold an annual meeting. However, Delaware, like many states, allows 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.
The board of directors will generally set policy for the corporation and make major financial decisions, including:
- Authorize the issuance of stock
- Elect the corporate officers
- Set officer and key employee salary amounts
- Decide whether to mortgage, sell, or lease real estate, and
- Approve loans to or from the corporation.
Delaware, like many states, requires directors to hold regular meetings. Delaware even allows for board of directors meetings to be held through telecommunications. Many states have followed and streamlined the procedures for operating a small corporation, permitting owners to make decisions quickly, without jumping through needless procedural hoops.
While the organizational structure of corporations separates the rights and duties of shareholders and directors, this separation is not much of an issue for small corporations because most shareholders are also directors and officers. Nevertheless, even if you are playing all the roles you must still observe the formalities required by law, which means serving in more than one capacity at different times. For example, sometimes you will sign a document in your capacity as director; at other times, sign as a shareholder.
Officers are responsible for the day-to-day operation and management of the corporation. State laws usually require the corporation to have at least a president, a secretary, and a treasurer. However, Delaware has traditionally allowed the same person to hold all of the required offices.
With many small corporations, the owners are also the employees of the corporation. Owners of small corporations receive most of their financial benefits through a salary received as corporate employees.