When you are ready to form your business, you will need to decide whether you wish to form a corporation or a LLC (Limited Liability Company). Generally, a corporation is a much more formal business structure, while the LLC is more flexible. This choice you make will influence how you structure the management of your company.
Corporate Management Structure
If you decide to form a corporation, you will have a more vertical, likely three-tier system of management. A corporation is owned by the shareholders who buy stock in the business. The high-level decisions for the corporation are largely made by a Board of Directors and who also select the officers of the company. The officers of the corporation are in charge of the day-to-day operations of the corporation.
Typically, there are four officer positions in charge of corporate management. Sometimes and individual may hold more than one office. The offices are the:
- President
- Vice President
- Secretary
- Treasurer
Each position comes with its own responsibilities, but they are all in charge of the running of the business and managing employees.
President
The main responsibilities of the President are to enforce corporate policies and signs legal contracts and other documents on behalf of the corporation. He or she answers directly to the Board of Directors.
Vice President
The Vice President is usually the successor of the President in case of dismissal, death or resignation. However, the Vice President is also a senior executive within the business and depending on the size of the business may be a Vice President of a particular function, such as Vice President-Sales.
Secretary
The Secretary is charged with keeping track of all of the corporation’s records and books.
Treasurer
The Treasurer is responsible for keeping track of the corporation’s financial records, their accounting operations and a record of all financial transactions.
LLC Management Structure
The management structure of an LLC is more horizontal and flexible than that of a corporation. The owners or members of the business may be directly responsible for the operations of an LLC. The members of the LLC can create their own corporate management structure and assign individuals to be responsible for the company’s daily operations.
Considerations for Incorporating
Before you decide whether to form a corporation or LLC, you should find out your state’s rules for incorporation. Each state has their own set of rules and some states allow for single business owners to incorporate, as well as have only one shareholder. However, if there is more than one shareholder, there usually has to be more than one member on the Board of Directors.
It also may be wise to consult a corporate attorney before you decide whether to form a corporation or an LLC. They can make you aware of issues you may have not thought through and help make sure you are following all state and federal laws involving incorporation.
