GENERAL FUNCTIONS
OF THE BOARD OF DIRECTORS

Table of Contents

Article I:Purpose
Article II:Duties and Responsibilities
Section A: Primary Responsibilities
Section B: Financial Structure
Section C: Policies, Objectives and Plans
Section D: Management
Section E: Controls
Section F: Employee Relations
Section G: Working Relationships
Section H: Standards of Performance
Section I: Expertise

Article I: Purpose

The Board of Directors is a supervisory body consisting of a set number of members which are defined in the Bylaws. The Board is to passon or review major decisions, to designate and remove the Chief Executive Officer, to watch out for signs of dishonesty in the top executives, and to correct incompetence or error on the part of the full-time management.

The Board should further provide direction of quality and nature to the total affairs of the business that will ensure the development and growth of the company in products, services, and in financial results.

In addition, provisions for the continuity of management of the quality and depth required to attain the objectives and serve the purpose of the business should be made by the Board.

Lastly, the Board serves as trustees for the investment of the stockholders, serves as the broad policy-setting body of the corporation, and as selectors of and advisors to the general management of the company.

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Myths of Corporate Formation and Compliance: Part II

THE “S” CORPORATION EXPLAINED

Myth: In order to form an S-Corporation, I only need to file the Articles of Incorporation.
It is not true that a corporate entity is fully formed with the filing of the Articles of Incorporation (or in the case of a Limited Liability Company, the Articles of Organization). Many times the questions are asked, “I formed my new corporation by filing the Articles of Incorporation, now what do I need to do?” and “My CPA recommended an S-Corporation, now what do I do?”

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Different Entities versus an LLC

Choosing which type of entity to use is among the most important decisions a business can make. Most clients wish to avoid personal liability for the obligations of the business (an attribute of corporations) and may also wish to personally deduct the losses of the business and avoid double taxation of the income of and distributions from the business (attributes of partnerships). For businesses with these objectives, the limited liability company may offer the best of both worlds. An LLC is generally treated as a partnership for tax purposes. At the same time, the LLC’s members, like corporate shareholders, are not personally liable for the debts of the business.

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Buying a Business Checklist

 This Checklist is prepared by [Buyer] on [Date] for the business [Target’s Name].

I. Finding and Evaluating an Acquisition Candidate

A. Research
For those who have not already identified a business to purchase, this may be the most difficult step.  Following are possible sources of information about businesses that may be for sale:

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Choosing the State of Organization of the Limited Liability Company

The Act provides that the laws of the state or foreign country under which a foreign LLC is organized govern its organization and internal affairs and the liability and authority of its members, and that a foreign LLC may not be denied registration by reason of any difference between those laws and the laws of California. Corp C §17450. Therefore, the Act permits members to “forum shop” for the LLC Act deemed most compatible with the members’ business purposes.

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Medical Reimbursement Plans

Definition – Medical Reimbursement Plan
A medical reimbursement plan is any plan where an employer reimburses an employee for uninsured health or accident expenses incurred by the employee or his dependents.  The most common type of Section 105 plan is a self-funded health plan, where the employer has chosen not to insure health care benefits and to self-fund these benefits rather than pay premiums to an insurer. Section 105 plans are also frequently found inside Section 125 Cafeteria Plans in the form of Medical Flexible Spending Accounts (FSAs). It is acceptable, however, to implement a medical reimbursement plan alongside a conventional health insurance plan (to reimburse amounts not covered by insurance) and outside of a cafeteria plan.

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Myths of Corporate Formation and Compliance

Myth:  In order to form a corporation, I only need to file the Articles of Incorporation.
It is not true that a corporate entity is fully formed with the filing of the Articles of Incorporation (or in the case of a Limited Liability Company, the Articles of Organization).  Many times the question is asked, “I formed my new corporation by filing the Articles of Incorporation, now what do I need to do?”

Continue reading