Your Burning Question About Corporate Directors & Officers
You’ve finally taken the leap and decided to turn your idea into an official business. It’s just you or you and one other person. You’ve decided to form a corporation rather than an LLC or other entity. (I hope you discussed this with an attorney) In any event, you’re filling out the paperwork yourself.
You get to the section on the Articles of Incorporation where you fill in the names of the initial board of directors of the corporation. Suddenly, you’re wondering if you have to bring in additional people to serve on your board to fill up the three blanks on the page.
The quick answer is, no, you don’t. Here’s why.
A corporation with a small number of shareholders is what is often called a closely-held corporation. In closely-held corporations, the shareholders often serve as shareholders, directors, and officers.
The shareholders both own the company and run it. And this is perfectly fine. You own it. You can basically do what you want with it (not defrauding consumers or other nefarious things, of course). If you’re the sole shareholder, you can serve in all the officer roles as President, Secretary, and Treasurer. And you can be the sole board member.
You should note that this is only true in the case of for-profit corporations. The rules are different for non-profit corporations. For starters, no one owns a non-profit corporation.
So don’t go out and grab your cousin to be on your board just because you think you need an additional person. If you think your cousin would be a nice addition to your board, you should consider her for that reason. But don’t do it because you believe there’s a legal requirement.