Yet, you can serve as a director of your own firm (in addition to being the founder and/or executive officer) with just one director. Your board of directors should expand as your firm expands and receives financing (in terms of the number of directors and their respective areas of expertise).
While a corporation’s board of directors distributes authority to officers (such as the president) to handle “day-to-day” activities, major decisions require prior board approval
The present conditions of your organization will determine whether a planned move is “substantial” to your business (as opposed to “day-to-day”). So, if you’re unsure, consult with an attorney. While there is no “one-size-fits-all” solution, the following activities will almost always require previous board approval for an early-stage company: amendments to the certificate of incorporation or bylaws; equity grants or transfers (whether stock, options, or warrants); distributions to stockholders; borrowing or lending money; adopting an annual budget; hiring or terminating members of senior management (or amending their terms of employment); adopting employee benefit plans (401(k), profit-sharing, health insurance, and so on); a sale or other distribution of all or substantially all of the comp’s assets (intellectual property licenses, customer contracts, vendor contracts, consulting agreements, office leases, equipment leases, etc.).
Purchasing office supplies, making expenditures authorized by a budget already approved by the board of directors, signing non-disclosure agreements, and recruiting rank-and-file staff are examples of “day-to-day” activities that normally do not require board approval.
Following best practices isn’t difficult
The board can act by adopting resolutions during a lawfully summoned board meeting (which can be held in person, through video- or telephone conference), or by a written consent signed by all members of the board of directors. So, if you’re the single member of an early-stage business’s board of directors, all you have to do is establish a written record of your approval of a corporate activity before it happens. Your lawyer can provide you a basic written consent form that you can customize based on the facts and circumstances. However, in general (and especially for equity awards and transfers (including stocks, options, and warrants)), We urge that you consult with your attorney to confirm that no further corporate action or filings are necessary.
Don’t be a pound-wise and a pound-foolish knucklehead
You might be thinking, “What’s the big deal?” or “Why should a busy entrepreneur waste time on formalities like board approvals when he or she could just hire an attorney to clear up any problems once the firm has raised money?” (or otherwise generated revenue). At least three factors contribute to this becoming a “major deal.” First, if potential investors determine that you do not take corporate governance seriously during their due diligence of your firm, you risk losing their trust. After all, future investors are going to expect you to join your board of directors. Second, having attorneys remedy mistakes will cost you more than simply avoiding the issues in the first place. Finally, and most significantly, certain errors cannot be corrected or can only be corrected at a very high cost. The charter of a firm clearly defines the responsibilities of the board of directors. This group is in charge of hiring the company’s CEO, president, or general manager. The board also decides on the company’s strategy and, as a result, its future.