Corporate Governance
T Registered Agents t Initial Reports t Annual Reports t Money and Accounting t Signing Documents t Bank Accounts
T Corporate Governance for Corporations
T Corporate Records
T Corporate Governance for Limited Liability Companies
The decision to raise capital, how much, what type, and so on, is made by the directors, managers, or partners of a business. Recent high-profile scandals involving a few public corporations highlight the need for responsible corporate governance at all levels. Clear-cut corporate procedures and responsibilities will not only keep your new company out of trouble, but will also prove to be an attractive asset to investors when you are looking for capital.
Most corporate governance statutes are directed to corporations, but that does not mean that limited liability companies (LLCs) and partnerships should discount the importance of creating policies and procedures for running their companies. Sound corporate governance applies to all forms of business. Much of the law regarding corporate governance is decided in the courts, and in particular, the courts of the state of Delaware.
There are a number of issues that are common to all business entities. There are also those that specifically relate to corporations and LLCs. For corporate governance purposes, partnerships are a close cousin to LLCs, and they can generally adopt policies and procedures similar to that of an LLC.
Corporate governance, at its essence, is the establishment and practice of rules and procedures that regulate the affairs of the body corporate. The corporation's bylaws contain the basic rules of corporate governance for a corporation. In the case of an LLC, those rules are contained in the operating agreement, and in the case of a limited partnership, in the limited partnership agreement. The legal standard applied to directors' actions to determine whether they discharged their duty of care and loyalty is the business judgment rule. The standard applicable to LLCs and LPs may be a higher standard, rising to that of the special care required of a fiduciary because of the substantial control exercised by the managing member and general partners over their members.
