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What’s the Difference between a Director, Officer, and Shareholder?

One of the sources of confusion for founders and businessowners tends to be who plays what role in the entity, and how the various entity roles differ from each other.

Who are the Directors of a Corporation?

 Once a corporation is formed, depending upon the jurisdiction, directors must be declared. Directors are the first persons who file papers with the Secretary of state to form the corporation.

There a few basic facts that you should know about corporate directors.

  • Director must include their names and addresses in the founding documents, known as the articles of incorporation.
  • Another word for directors is “incorporators.”
  • Courts have discretion in classifying directors using case law.

Who are the Officers of a Corporation?

In the charter or bylaws of the articles of incorporation, the corporation declares a complete list of its officers. This includes a president, vice-president, treasurer and others. This contrasts to a traditional small-business which may have one manager and several employees.

  • It is helpful to known the fine line in distinguishing an officer from a mere The distinction between a president of a corporation is that he or she manages the affairs of the corporation whereas agents do not act to fulfill the corporate’s charter.
  • Another distinction arises from the creation of the position. For example, the corporation’s charter creates an office occupied by the officer. Officers then can choose to create agents to act on their behalf.
  • Nevertheless, officers and agents are commonly used to refer to the same position. To be sure, reports of persons acting on behalf of the corporation may be called loosely as either term.
  • In addition, officers can be classified in other ways by state wage laws including the California Department of Industrial Relations and the Labor Commission. Officers may be considered employees given certain same rights and duties specified in the particular code.
  • Officers are long-term associates of the corporation as to those who perform single transactions.
  • If a corporation is a non-profit type, there may be other officers enumerated in the charter and bylaws of the corporation.
  • Courts have discretion in classifying individuals associated with a corporation as officers

 Who are the Shareholders of a Corporation?

In the charter or bylaws of a corporation, the shareholder is defined as an individual owning one share in the corporation.

  • A shareholder has regular access to the corporation’s finances and accounting records.
  • A shareholder can bring lawsuits against the corporate directors and officers when the shareholders allege that the corporations are not serving their shareholders needs effectively.
  • Shareholders do not participate in the day-to-day operations of a corporation; however, regularly prescribed meetings allow shareholder participation

Getting Legal Help

AXIS Legal Counsel’s Business and Corporations Practice provides legal advice to numerous businesses with a wide range of business matters. Axis  represent small, medium-sized, and large business clients with a wide variety of business and corporate law matters. We represent early-stage companies as well as established businesses on a wide variety of business law matters, ranging from contracts and transactions, intellectual property, labor/employment law, business financing, mergers and acquisitions, real estate, insurance, business succession planning, and general advice and counsel.  For information on retaining AXIS Legal Counsel to represent your business in connection with any legal matter, contact [email protected] or call (213) 403-0100 for a confidential consultation.


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