Video summary:

In this transcript from a video by Gale&Vallance, Andy Gale of Gale & Vallance in Orange County explains the distinctions between shareholders, the Board of Directors, and officers in a small business corporation. He focuses on the Responsibilities of officers in a corporation, detailing how officers manage day-to-day operations while remaining accountable to the board, and how the board, in turn, is accountable to the shareholders. This video provides insights for small business owners to understand their roles and authority within a corporation.

Please note, this video does not constitute legal advice, and we recommend contacting a lawyer regarding your specific situation.

Transcript

Introduction: The Confusion Around Corporate Roles (00:00:06.580 – 00:00:17.000)

One of the areas that tend to confuse a lot of owners of small business corporations is the difference between shareholders, Board of Directors, and officers. It’s important

Wearing Distinct Hats in a Small Business Corporation (00:00:19.000 – 00:00:40.600)

to know that when you’re running a small business corporation you wear very distinct and different hats. Okay? So the basic difference is this: the shareholders are the owners of the company so they’re the people that when the company gets sold, they sell it at a profit or they sell it at a loss. But that’s really their role in life is that it’s just one of ownership.

Role of the Board of Directors (00:00:40.600 – 00:00:49.589)

The shareholders will then elect a Board of Directors. The Board of Directors are the guys who basically set the vision for the company. Okay?

Role of Officers (00:00:49.589 – 00:00:59.589)

And then the officers are the people that are charged with running the company on a day-to-day basis and making sure that they follow the direction of the board, and they’re accountable to the board, and then the board are accountable to the shareholders.

Challenges in Small Business Corporations (00:01:01.000 – 00:01:33.880)

Now, the tricky thing for people who run small business corporations is “I’m the shareholder, I’m on the board of directors, and I’m the officer, and I’m the chief bottle washer, and in charge of marketing, and everything else.” And in their head it gets all scrambled, but there are specific tasks that are designated for shareholders, there are specific tasks that are designated for board directors, and there are specific tasks designated for officers, and it’s important when you’re running a company that you want to make sure “What’s my capacity for making this kind a decision, and am I acting in my appropriate level of authority?”

Comparison to Large Corporations (00:01:39.730 – 00:02:04.890)

Now if we were Microsoft, for example, it would be very easy because Bill Gates, and me, and you — we all own shares of the corporation. There’s a specific professional board that’s been appointed with people with different expertise that they have expertise within, say, the tech industry and expertise outside the tech industry. So together they can set a vision for the company and then they will hire professional officers to run the company — the president, and the secretary, and treasurer, and a lot of other positions, and then there are all of the employees.

Key Takeaways for Small Business Owners (00:02:09.389 – 00:02:22.260)

So when you’re running a big corporation it’s a lot clearer than when you’re running a small corporation, it’s easy to confuse. But the law is the same for Microsoft as it is for you, and when we’re running and when we’re operating in those various capacities, it’s important to remember what it is that we’re doing and why it is we’re doing it.

Conclusion: Responsibilities of Officers in a Corporation

Understanding the Responsibilities of officers in a corporation is crucial for small business owners to operate effectively, stay compliant, and maintain accountability to the board and shareholders. By clearly defining your role as an officer, shareholder, or board member, you can make informed decisions, avoid legal pitfalls, and ensure your corporation functions smoothly.