Understanding Corporate Positions and Titles
When it comes to companies, there are a lot of titles and positions that are talked about. They are often interchangeable; even people savvy in the legal and business world, confuse them, or use them haphazardly. But titles in the business legal world do mean a lot, and have very specific legal meaning.
Here’s a short glossary of the most common-and most commonly confused—corporate titles.
Owner – Although this word has a common meaning, in the legal corporate term, it is either not used, or else, other words are used to define what people would call an owner.
Yes, the Florida Department of Corporations does use the term, and you can register a company with names under that title, but in a corporation, there may not be an “owner,” as the owners may be the shareholders, collectively.
And when you get into LLCs, where owners are managers, the term becomes even less relevant. Note that in LLC, an owner may be a “manager,” not to be confused with an actual officer that is a manager (see below).
Also be aware that in a partnership, the owners are the partners; there is no legal title of “owner.”
Directors – Directors are members of a company’s board of directors. In most companies, the directors are elected by the shareholders. Directors don’t legally have to have any association with the company—that is, they don’t have to work for the company, and some may have no knowledge about the workings of the company (especially in larger companies) although they usually are shareholders.
Directors may have more or less authority to make decisions on the daily operations of the company, depending on what power the company’s governing documents give to them
Shareholders – Money provided by shareholders is used to help the company operate; shareholders “invest” their money in the company and in return, reap the financial rewards when the company does well.
Depending on the size of the company, shareholders may have significant day to day authority, but they may have little or no voting power or say in how the company is run. Your bylaws can establish classes of shareholders, some of whom may vote, not vote, get dividends, or do other things for the company.
Officers – an Officer is a higher level employee with a title; think of a President, CEO, Vice President or Controller. Many officers are shareholders of the company as well.
They usually have independence to run the company and make corporate decisions as they see fit—but can also be removed as officers by the Board or by the shareholders, if the company isn’t doing well.
Note that an officer may be called a manager, such as “Manager of Sales,” or “Finance Manager,” but that is different from being a manager of an LLC, which is a full fledged owner.
Confused about corporate law? Let us help you get that new business going. Call our West Palm Beach business attorneys with any questions you may have at Pike & Lustig today.