Business Law: How to Form a Board of Directors

What is a Board of Directors and What Do They Do?

Part of forming a corporation is establishing a board of directors.

Because corporate laws vary from state-to-state, you need to check with a business attorney or consult your Secretary of State's office to determine your state's statutes concerning the board of directors.

The bylaws in your corporation determine the number of people you can have on your board of directors, the length of time they serve, what positions or offices they hold in your company, and when meetings are held.

How Do you Find People to Serve on your Board of Directors?

• Depending on your state statutes and your corporate bylaws, you can find people you know who take in active interest in your business and its growth. Concentrate on people who are responsible and have business knowledge in their field.
• Your board of directors can greatly enhance the operation of your business because each member brings with him or her knowledge that you won't need to buy; i.e. free information instead of paying for services.
• Depending on how your corporation is set up, your board of directors can receive dividends or profit sharing for their time and contributions.
• Normally, corporate officers consist of a president, vice-president, secretary, and treasurer.. However, depending on your business needs, your board of directors may need someone with great communication skills so you might create a human resources position. If your business needs financial assistance, consider creating a position for an accountant for financial affairs.

Important Points to Remember when Forming your Board of Directors:

• The number of people, the length of time they serve on your board, and what position each person holds is contained in your corporate bylaws.
• Be sure you and your business is in compliance with state and federal statutes and regulations.
• Establish a board of directors that fills needs for your company. Don't just hire someone like your best friend because you like them. Invite people to serve who will take an active role in your business and have knowledge to contribute.
• Meetings are important in order to keep all of your corporate officers on the same page. A meeting schedule should be established in your corporate bylaws.
• Consider having back up people who can serve on your board of directors in case one of your members or officers is unable to continue their service.

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