Company Structure: Corporation

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What is the structure of a corporation?

what is the structure of a corporationThe Delaware General Corporation Law is flexible with respect to the type and number of officers a Delaware corporation must appoint.

The applicable portion of the Delaware Corporation Law provides that a Delaware corporation shall have “such officers with such titles and duties as shall be stated in the bylaws or in a resolution of the Board of Directors which is not inconsistent with the bylaws.”  

Therefore, a corporation can create, by board resolution or through its bylaws, titles and positions for corporate officers that are as mundane or creative as it would like.

A corporation may also grant these officers whatever powers—and authority over company operations—that it deems necessary or appropriate. 

There are no required officer positions or titles that a Delaware corporation must create, as opposed to a set of required titles in other states. Most Delaware corporate founders deem it prudent to have an executive officer, such as a Chief Executive Officer or President, as well as a Secretary.

The Secretary fulfills the requirement in the law that dictates an officer must be assigned to record the proceedings of stockholder meetings and Board of Directors meeting.

One person may hold multiple officer positions or be the only officer, as is often the case in the early stages of a start-up’s existence.

In recent years, particularly among tech companies and millennial-owned start-ups, creative (and sometimes downright silly) corporate officer titles have been used, including:

  • Chief Amazement Officer (a product development role)
  • Creator of Opportunities (business development)
  • President of Miscellaneous Stuff (an appropriate though tongue-in-cheek descriptor for a company’s founders and initial officers)
  • Godfather of Talent (recruiting and Human Resources)
  • Vice President of People Operations (what Google calls its Human Resources department)

This creativity in titling can add an interesting and fun aspect to a corporation, but in a start-up or relatively early-stage corporation, it is often recommended to create clearly-defined officer positions that will convey a distinct meaning to both customers and potential investors. 

Therefore, while the title of “Tech Jedi” may be unique and alluring, “Chief Technology Officer” (or another, more recognizable title) may prove to be more sensible.

structure of a corporation

Customizing officer titles via unusual naming conventions can always be adopted once a corporation’s initial viability and business model have been proven, and growth is moving consistently forward.

Whatever titles are utilized, Delaware courts have held that corporate officers created at the board level, or through the bylaws, owe the corporation the same traditional fiduciary duties of care, loyalty and good faith as the members of the corporation’s Board of Directors. 

Therefore, a corporate officer, particularly if he or she is not already on the Board of Directors, and therefore already subject to fiduciary duties, should become familiar with his or her fiduciary duties to the company and the resulting obligations.

 

More By Brett Melson

There are 2 comments left for Company Structure: Corporation

Danan Coleman said: Saturday, February 4, 2017

Hey Brett, Good data. Thanks so much.

HBS Staff replied: Tuesday, February 7, 2017

You are quite welcome! Glad you found the blog helpful!

diego torres said: Thursday, February 2, 2017

Can we launch an LLC and then get stablished as a corporation for tax purposes? If we do so, could we decide that some of the shareholders will have passthrough and others won´t? Or it should be the same for all the shareholders? If some of the shareholders are non US residents, could we set up an S Corporation? Thank you

HBS Staff replied: Tuesday, February 7, 2017

The IRS allows the LLC to be recognized as a corporation for the purposes of filing taxes. The LLC typically files Form 8832 with the IRS and elects to be recognized as a corporation. Typically, the taxation is for the entity and cannot be broken down to have each member of the LLC taxed with a different tax status. 

For more clarification you may want to consult your accountant for assistance on what would be the best way to tax the LLC.  

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