Should You Dispense with the Board of Directors for Your Small Corporation?
When setting up a small corporation, you have an important choice: should you have a board of directors or not? If your company has three people or fewer, it might be possible to dispense with the board altogether, depending on your needs and situation. Let’s explore if this is the right move for you.
What Does Dispensing with the Board Mean?
The board of directors is usually responsible for overseeing the company’s direction and making high-level decisions. If you decide to dispense with the board, one individual takes over the board’s duties, which makes decision-making simpler. This person could be one of the owners or an officer, such as the CEO.
Who Should Dispense with the Board?
If you have a small corporation with three or fewer people, here are some situations where it makes sense to dispense with the board:
Single Owner Companies
- If you are the only owner, having a board is often unnecessary. You make all the decisions anyway, so adding a formal board layer only creates extra work. Dispensing with the board gives you full, direct control without extra meetings or formalities.
Family-Run or Friend-Owned Businesses
- If your corporation is owned by you and one or two family members or friends, and everyone trusts each other, dispensing with the board can make managing the company easier. Instead of formal board meetings, you can make decisions together more informally, speeding up the process and keeping things simple.
Want to Save Time and Money
- A board of directors adds some administrative costs and requires extra paperwork, like keeping minutes of meetings. If you want to focus on running your business without these additional formalities, dispensing with the board can be a practical choice. This is especially true for small companies where the owners are also managing the day-to-day operations.
Who Should Not Dispense with the Board?
While dispensing with the board has its benefits, it’s not the best option for everyone:
Companies with Growth Plans
- If you plan to raise money from investors or grow your business significantly, it’s often better to keep a board. Investors like to see a formal structure, including a board that can provide oversight and strategic direction.
Potential for Disputes
- If there are disagreements among owners, having a board can help ensure decisions are made fairly and with proper oversight. Without a board, it may be harder to resolve conflicts or create accountability between owners.
Conclusion
For small corporations with three or fewer owners—especially if you all trust each other and want to keep things simple—dispensing with the board can be a great choice. It reduces paperwork, cuts costs, and makes decision-making more direct. However, if you plan to expand or think there may be disagreements, keeping a board can provide valuable structure and oversight.
Think about your business needs and goals, and decide what will work best for you.