A group of individuals elected by shareholders to govern and oversee a corporation’s management and major decisions, typically including company strategy and executive hiring.
What is the Board of Directors?
The Board of Directors is a central feature of corporate governance (for corporations, not LLCs). When you form a C-Corporation in the U.S., the owners (shareholders) either directly, or via initial bylaws/incorporator action, appoint a board. The board’s job is to represent the interests of the shareholders, provide oversight of the company’s management, and make key decisions that fall outside day-to-day operations. This can include hiring/firing the CEO, issuing new stock, approving major transactions (like acquisitions or significant loans), setting broad policies, and declaring dividends.
For a small startup, initially the board might just be the founders themselves. For example, if you and a co- founder incorporate and each hold significant shares, you might both be the only directors. As the company takes on investors, they often negotiate board seats (e.g., a venture capital investor might want one of its partners on your board). A typical startup board might have 3 to 5 members in early stages – often the CEO, maybe a co-founder or industry expert, and one or more investor representatives. The board acts by holding meetings (or written consents) and voting on resolutions. U.S. corporate law generally requires that certain actions get board approval. In Delaware, for instance, the board manages the corporation’s business and affairs (except for what’s reserved to shareholders by law). They have a legal responsibility to act in the best interest of the company and its shareholders — including a duty to make informed decisions (duty of care) and a duty to prioritize the company over personal gain (duty of loyalty).
For non-U.S. founders, understanding the concept of a board is important if you opt for a C-Corp structure, especially as you raise capital. It’s distinct from an advisory board (which has no legal authority) – a formal board of directors has legal power and responsibility. In many cases, if you’re the sole owner and a small operation, you will fill all roles (shareholder, director, and officer). But as you bring in more stakeholders, formalizing the board’s composition is critical. Directors can be individuals from any nationality – there’s no U.S. citizenship requirement to sit on a board. Meetings can be held anywhere or even virtually, as long as minutes are kept. Corporate formalities like electing the board at annual shareholder meetings and documenting board decisions in minutes are things to keep track of (Clemta’s compliance tools or templates might help with reminders). Keep in mind that LLCs do not have a board of directors unless they choose to structure one by agreement – LLCs are managed by members or managers – so “board” is specifically a corporation concept (and also non-profits).
In summary, the Board of Directors is the governing body at the top of a corporation’s hierarchy, ensuring accountability and direction. If you incorporate a U.S. company, you’ll need to understand how to set up and use a board effectively – even if it starts as just you, respecting that structure can be important for legal compliance and investor confidence.
