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This web site operates from the prospective that the user already
has a business entity and the entity of choice is the S-corporation.
While good business practices may apply to every business, the user
must decide whether to use and how to apply the content found here.
The authors cannot. As always, read all closely and think before you act.
What Corporate Actions Need Board Approval?
Board of Directors in Session
It is not complicated to know when the board of directors must lead. Action is required in situations similar to those in one’s personal life when making important decisions. For the S-corporation the answer is simple:
“All significant corporation transactions should be considered and approved by the board prior to acting. In particular, obligations, contracts or agreements that will last longer than one year and a day are done at the board level.”
As a minimal guide, the board should officially approve each of the following:
• Amendment of the bylaws;
• Issuance of shares to new or existing shareholders;
• Election of officers;
• Approval of transactions or activities involving conflicts of interest;
• Employment agreements for any corporate director, officer or shareholder;
• Borrowing by the corporation or loans from the corporation to others;
• Leases involving the corporation;
• Distribution of money/assets to the shareholders;
• Approval of any major purchase or sale or other significant corporate transaction, such as real estate purchases;
• Approval of employee benefit plans;
• Approval of hiring professionals such as accountants, lawyers, registered agents, consultants, etc.
• Selection of banks and opening of accounts; and
• Annual reports and other financial statements.
Naturally an exhaustive list cannot post here because the nature of corporate business implicates what the duties of the board might be. These above cover the bases for the majority of small companies.
The most insightful move any young S-corporation can make is to get an experienced corporate secretary. Such a professional can act as guide for first couple years of business operation. This is exactly where JACS can be an invaluable asset to young, start-up and medium-sized s-corporations. Corporate secretaries are perhaps the most important individual in the whole corporate structure; don’t leave home without one.
Written by James Allen, August 14th, 2009
Filed under: Board of Directors
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