The Basics of Corporate Governance

Corporations are not always some huge, multinational company with billions of dollars in profits and CEOs with multimillion-dollar salaries. Plenty of first-time business owners choose to form a corporation for personal liability protection and in accordance with their entrepreneurial goals. It is also common for LLC members to convert their companies to corporations in order to take on outside funding. 

Whatever your reason for starting a corporation, our firm applauds you for your entrepreneurial spirit. The internal governance of a corporation is more complex than those of other business structures. The key players in a corporation are the shareholders (owners), officers, and directors. We will explain the important responsibilities of each role below. 


The owners of a corporation are referred to as shareholders. These people pay for stock in a corporation and typically receive dividends for their financial contributions. Many shareholders hold voting rights, which they may exercise to elect directors, approve mergers or acquisitions, and engage in other important matters. A corporation may have different classes of stock; each class might have different rights attached to it. For example, one class of stock may not provide shareholders with voting rights. Another class may provide shareholders with liquidation rights. 


C-level executives are considered to be officers of a corporation. Common titles of officers include CEO (chief executive officer) and CFO (chief financial officer). These executives are responsible for implementing the high-level business strategy that is developed by the board of directors. In other words, CEOs and other officers are the bridge between a corporation’s directors and the ground floor (or middle management). 


The directors of a corporation, who collectively make up the board of directors (often referred to simply as “the board”), are tasked with nominating officers. Directors also approve shareholder distributions and executive compensation packages. The board of directors has purview over big-picture items and may sometimes share approval rights with shareholders. 

Starting Out

Many times, an entrepreneur will act as the sole shareholder, officer, director, and employee of a corporation. After all, someone must file the Articles of Incorporation with the California Secretary of State’s office and pay filing fees. The primary task, though, is preparing the Bylaws for your corporation. 

The Bylaws of a corporation should explain the initial stock classes, procedures for nominating officers and electing directors, and protocols for amending the Bylaws. That’s only a few of the many important matters that corporation owners need to work out at the beginning. Don’t forget about setting annual shareholder meetings and filing the Statement of Information no later than 90 days after incorporation. Additionally, your corporation is required by California law to have a President, Secretary, and CFO. Again, one person can fulfill these three duties. 


Attorney Tyler Q. Dahl is ready to help you form your business with an eye on your long-term personal and professional goals. Forming a corporation is a lot more involved than starting an LLC or corporation, which means it is best to have an experienced attorney by your side. As one of fewer than 100 attorneys nationwide who is also a Certified Tax Coach, Attorney Dahl can help your business save money and help you protect what matters most. Let us know how we can help.

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Dahl Law Group

At Dahl Law Group, we’re not just a law firm. We’re your trusted advisor for your business and family from beginning to end. As your family and business grow, we will be there by your side. Our passion is providing you with peace of mind and protection through personalized estate and business planning.