Advance your company to the next level by hand-picking a board of directors. If you intend to register your business as a corporation or S corporation, you are required to form a board of directors. If you are not registering your business as a corporation, creating a board of directors is completely optional. There are no etched-in-stone rules for setting up a board, but It is generally wise to consult a business attorney before setting up your board.
Things To Consider
Assess what your company's needs are before proceeding to set up your board of directors. Outline your corporation's goals and the steps you will take to reach those goals. Determine how many people you want to sit on the board. While some states require corporations to have a minimum number of board members, there is no maximum number of members you can have. The average board is five to 12 members. Determine if and how you are going to pay the board members. If you intend to pay them with stock, determine the percentage of company stock you intend to offer. If you want to maintain power over your company, reserve at least 51 percent of company ownership for yourself. Otherwise, the board of directors become majority shareholders, and control your company.
It's Not Personal
When setting up your board, consider what is in the best interest of the business. It can be tempting to select friends and family members to sit on your board. This is OK, as long as the friend or family member complements your business instead of just occupying space. Each board member should be an asset to your company. Select a board member based on skills, qualifications and industry familiarity. Review the curriculum vitae of each potential board member and verify the information.
Recruit board members who are strong in the areas where you are weak. Otherwise, you don't need them. There are three key positions to consider filling as soon as possible: finance, marketing/brand management and industry specialist. The finance person is responsible for overseeing all things money related. The marketing person is responsible for marketing your product or service to the public and establishing brand awareness. The industry specialist provides expert advice on the industry.
Make It Plain
The more members you have, the easier it is for contention to arise. To thwart this, educate the board on each individual's role and responsibility. By doing this in the beginning stages, you minimize the risk of misunderstandings later on. The roles and responsibilities are usually documented in the company bylaws. Make your goals plan, as well as the path you intend to take to reach those goals. Put the goals in writing, to serve as a road map. The board members can periodically reference the road map to ensure the organization doesn't veer off track.
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