Updated November 6, 2020:

Knowing the c corp board of directors requirements is a vital part of running a corporation. One of the most important tasks after incorporating is selecting your board of directors. The structure of your corporation will be based on three primary components.

  • Shareholders.
  • Board of Directors.
  • Officers.

The board of directors is the entity that is tasked with running the corporation. They can often be referred to as:

  • Board of Trustees.
  • Board of Governors.
  • Executive Board.

The board will be elected by the shareholders and should be chosen based on their ability to:

  • Provide oversight.
  • Provide guidance.
  • Move the corporation forward.

You do not have to pay your board members and sometimes when you do it, it may be considered a conflict of interest. The standard is to pay for travel expenses to and from the board meetings which is tax-deductible. When creating a board of directors, you will need to have a:

  • Chairperson.
  • Vice-Chair.
  • Secretary.
  • Treasurer.

Board Member Voting

Each member of the board will have equal voting rights though there are some jurisdictions such as Delaware where equal rights are not required.

Duties of Board of Directors

The officers of a company, as well as the Board of Directors, are bound not only by state law but by the bylaws of the company as well. Their duties are to handle finances and fulfill the legal requirements set forth by the company.

It is the board of directors that determines the mission of the corporation and sets the policy that both the employees and officers are required to follow. They are not participants in the day-to-day operation of the business, but it is their responsibility to those representing the company and running it.

Some corporations may choose to put outsiders such as successful business owners or lawyers to bring in their outside expertise and also to use them as a source for business contacts. When choosing board members, it is a good idea to choose members that can be helpful or experienced with the products and service you sell.

Duty of Loyalty

Board members are expected to remain loyal to the corporation and its goals which is referred to as duty of loyalty. This means that the board members cannot receive inappropriate benefits from the corporation to steal their business opportunities.

Duty of Care

Board members are tasked with making decisions that are in the best interest of the corporation at all times. This means looking at the available facts and way them to make an appropriate decision. If a board makes a decision that ends up resulting in serious losses for the shareholders that can be sued for violating their duty of care.

Board Meetings

A board meeting will follow a standard format often similar to Robert's Rules of Order. During a meeting the board will:

  • Approval of last meeting minutes.
  • Reviewing the treasurer's report.
  • Reviewing any committee reports.
  • Discussing old business.
  • Discussing new business and taking any votes.

All discussions will be recorded by the secretary as the minutes of the meeting.

There are some states that allow a corporation to operate without having a board of directors to run it. In that case, all of the shareholders must voice their agreement in writing. They will also assume the duties that the board would normally have in the running of the company.

You will only want to proceed without a board of directors if you have a smaller amount of shareholders. If there is a vast number of shareholders, it can be hard to come to decisions making the business more difficult to manage.

Compensation of Corporate Board Members

There are some corporations that wish to provide some compensation to their board members though this often depends on the size of the company. Nonprofit corporations rarely compensate their board members except for reimbursement of expenses.

In some cases, board members might receive compensation through stock options if the company is publicly traded. It is important when providing forms of compensation that it is not so much that it would entice someone to be on the board.

Removing a Corporate Board Member

There are some instances where a board member needs to be removed. Because of this board members often have term limits in which they are removed after the term is up. Otherwise, they will need to be dismissed from their position.

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