Responsibilities of a Corporate Board of Directors
If you’re a small business owner who wants to incorporate, first you must form a board of directors. Boards can be made up of owners of the company as well as nonowners. You can even have your spouse and children on the board.
Corporations provide a veil of protection for company owners, but in order to maintain that protection, the owners must comply with many rules unique to corporations. The board of directors takes on the key role of complying with these rules, and it must maintain a record of meeting minutes that prove the board is following key operating procedures, such as:
Establishment of records of banking associations and any changes to those arrangements
Tracking of loans from stockholders or third parties
Selling or redeeming shares of stock
Payment of dividends
Authorization of salaries or bonuses for officers and key executives
Undertaking of any purchases, sales, or leases of corporate assets
Buying another company
Merging with another company
Making changes to the Articles of Incorporation or bylaws
Election of corporate officers and directors
Corporate board minutes are considered official and must be available for review by the IRS, state taxing authorities, and the courts. If a company’s owners want to invoke the veil of protection that corporate status provides, they must prove that the board has met its obligations and that the company operated as a corporation. In other words, you can’t form a board and have no proof that it ever met and managed these key functions.