Starter Law 101: The Flesh and Blood of a Corporation
Shareholders, Secretaries, and maybe even Assistant Treasurers: the people of a corporation
4 min read
Business lawyers will love to tell you - if you let them - that a corporation is nothing more than a "legal fiction", which is to say it's invisible, amorphous, a creation of the law and nothing more. But in the real (non-lawyer) world, we all know that a corporation is made up of the people who group together to do work - and hopefully make a profit - under the umbrella of that legal fiction.Lest you confuse a corporation with an anarcho-syndicalist commune, however, you should know that there is a very specific hierarchy of the people who make up a corporation, and at its heart, that hierarchy is determined by voting. After all, you can't expect to wield supreme executive power just because some watery tart throws a sword at you.
Simply put, a corporation's shareholders elect its directors, who in turn appoint officers. But that just scratches the surface of the various positions within a corporation. Let's take a look at the various roles, one by one:
Incorporator: A corporation’s incorporator signs the company’s formation document (typically called Articles of Incorporation or Certificate of Incorporation), files it with the state of formation, and then typically resigns. While their name is on the formation document for the life of the corporation, their role with the company (in the capacity of incorporator) generally ends once the initial board of directors is named.
Shareholder: Also called a stockholder (the names are interchangeable), the shareholders are the owners of the corporation. They can own different amounts and different types of stock (voting and nonvoting, common stock, preferred stock, etc.) Shareholders elect the directors of the corporation.
Director: Every corporation has at least one director. Together, the directors make up the corporation’s “Board of Directors”, or “Board” for short. Directors are responsible for major decisions affecting the company, including selecting the corporate officers (President, CEO, Secretary, etc.), amending the Articles of Incorporation (usually with shareholder approval as well), approving the sale or winding up of the business, and setting strategic priorities and goals, among other major decisions.
President: The President is in charge of the day-to-day operations of the corporation. He or she has responsibility for entering into contracts, making operational and personnel decisions, and directing the actions of the other corporate officers and executives. Every corporation has a President.
Chief Executive Officer: Also known as the “CEO”. Not all corporations will have a CEO, but if they do, the CEO is above the President (and all other officers) in authority. They basically have all of the responsibilities of the President described above, but generally delegate day-to-day operations more than handle them directly.
Vice President: Not all corporations have a Vice President, but if they do, the VP(s) (there may be more than one) handle whatever executive authority is granted to them by the President and/or CEO. Often, Vice Presidents are assigned a specific area of responsibility in the corporation (e.g., VP for Finance, or VP of Marketing). Most new and smaller corporations don’t have a need for Vice Presidents.
Secretary: Together with a President, a Secretary is usually one of only two mandatory officer position for corporations. Not to be confused with an executive assistant or a receptionist, the Secretary is responsible for management of the company’s records and paperwork, including keeping minutes of meetings of the directors and officers, and related functions. Very large corporations may also have one or more Assistant Secretaries, who... well, assist the Secretary.
Treasurer: An optional officer position for corporations, the Treasurer is responsible for management of the company’s finance, accounting, bookkeeping, banking, and related functions. Very large corporations may also have one or more Assistant Treasurers, who... you guessed it, assist in the Treasurer's duties.
Registered Agent: A corporation’s registered agent is a person or company designated by the corporation to receive legal documents and notices from the Secretary of State of the state in which the corporation is formed, or other states in which the corporation is qualified to do business. Every state requires that a corporation specify a registered agent. A corporation will usually either designate an owner, director, or officer as its Registered Agent, or hire a professional Registered Agent company to act in that capacity. Startomatic LAUNCH offers a professional registered agent service at a cost of $99 per year.
If you start your corporation with Startomatic, there are two other Startomatic-specific roles you should know about:
Tax Contact: This is not a legally-created role, but a role specified by Startomatic to be responsible for one or more company tasks, depending on the company’s structure and tax choices. Here are the responsibilities of a corporation's Tax Contact:
(a) If the company is applying for an Employer Identification Number (EIN) from the IRS, it is required to designate a “Responsible Party” who the IRS can contact if it has questions about the EIN filing. The Responsible Party is also required to provide their Social Security Number and a contact phone number.
(b) If the company is making an S-election with the IRS, the Tax Contact is the person the IRS will contact with questions about the election, and must provide a contact phone number.
Legal Contact: Again, not a legally-created role, but a title specified by Startomatic if the company chooses to have Startomatic appoint a professional Registered Agent. In that case, the Legal Contact is the person to whom the Registered Agent forwards official communications. These communications may include state annual reports, state franchise tax information, and service of process (lawsuits and other legal filings relating to the company).
But what about LLCs, we hear you asking - stay tuned for our upcoming blog post on the cast of characters in an LLC - we'll link to it here.
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