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Understanding The Positions And Terms Of A Basic Corporation


Officers, owners, managers, shareholders, directors…they all seem like words that get thrown around every time anybody talks about companies. But what do they mean? What are the roles in a typical corporation? Of course, each is pretty detailed, but a quick summary about what these titles mean can give you some basics on how corporations operate.

Owners – An owner is more of a lay-person’s term, as being an “owner” of a corporation is not actually a legal term. Of course, you can own a company by having title to it or being registered as an owner with the state. But unless you are a sole owner, your owners also include shareholders, who are part owners in the company.

Remember that if you own a company and you do not incorporate with the state, you are not actually a company, and will not get the legal or financial benefits that corporations may receive.

Shareholders – These are individuals who, by virtue of owning shares, have some stake in the outcome of the company. Money used by shareholders is used to fund the company.

Shareholders will receive dividends (money) when the company does well, but they will not pay out of their pocket, or owe any money, if the company loses money. In closer, smaller companies shareholders may have a direct say in how the company is operated, whereas in bigger companies, shareholders will do very little.

Making shareholders more complex, there can be different classes of shareholders, and each can receive different dividends, have differing voting rights, or different duties or obligations. Both your corporate documents, and your shareholder agreements, will detail the kinds of corporate shares that are available or which are owned by each shareholder.

Officers – Think of an officer as someone with a title or a job position. President, Vice President, Controller, and Secretary are common, but in large companies, there can be any number of titles. Officers usually are charged with carrying out the goals of the company as set by shareholders or directors, but officers have autonomy to make certain day to day decisions on their own. How officers are chosen, approved, or fired, as well as their job descriptions, is usually dictated by the company’s governing documents.

Directors – A board of directors is a governing body that makes decisions about how the company is run. In some companies, the directors are very powerful, and in others, the directors are more ministerial, and simply approve or supervise the actions of the officers of the company.  The corporate documents will usually say what powers the board of directors have, when they meet, how they vote, and other formalities.

Often, directors are also shareholders in the company, and in some companies, directors can only be shareholders. Regardless, in many cases corporate documents will restrict what a board of directors can do without first obtaining approval from shareholders. This usually includes major decisions about the company.

Call the West Palm Beach business litigation lawyers at Pike & Lustig for help forming your business, or making sure your company is running effectively and legally.



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