What are the responsibilities of a shareholder?

In this episode of Coffee with Carl, attorney Carl Zoellner explains the role of a shareholder within a corporation.  

 

You get a reserved parking spot, plus perks. 

When it comes to corporate lingo, a common term everyone’s used to hearing is “shareholder”, but does anyone really know what a shareholder is? 

Today, I want to spend a little time and chat about the role of a shareholder within a corporation. 

This tends to be one of those items that’s very easy to understand seemingly sitting in the room. However, when you get home and you’ve got your corporation setup, the lines get blurred.  

What does a shareholder do? What does a director do? What does an officer do? Why are these positions important? Is it for perks and bragging rights? Well, I’ll break it down. 

At its most basic definition, a shareholder is an owner of the corporation. They are the individuals that hold the shares or the ownership interest in a corporation. To better conceptualize the role, it’s helpful to look at it from a zoomed-out perspective. 

Imagine your Fords, your G.E.s, and your Tootsie Rolls. These types of companies are huge companies. If I go into my broker and buy a share, I own a small percentage of that company. When we start talking about your own corporation, you tend to own a much larger portion of your corporation. 

Well, it’s the same type of thing when I’m buying shares on the stock market. When I’m buying shares, I’m taking ownership. When I’m buying or acquiring shares in my own corporation, that’s the percentage I own. 

So, if I have a thousand shares and I own the entire thousand, I have a hundred percent ownership. What are the rules or what does a shareholder need to approve? Well, for starters, shareholders have annual meetings, which elect and approve a board of directors. 

Shareholders are involved if the company is going to dissolve or liquidate all of its assets. In this case, a shareholder vote is required–as well as things like emergency meetings. A lot of times, mergers and acquisitions require that shareholders attend. 

It’s a global kind of decision when the shareholders are involved as owners, even if it’s a small corporation. It’s helpful to think of corporations as a well-oiled machine, and each role is responsible for helping that machine run effectively.  

When it comes to decision-making, for shareholders, your primary responsibilities are going to be electing directors, which happens annually. Outside of that, it’s a wide array of responsibilities, unless for some reason, your corporation’s going to shut down or you’re disposing of all or substantially all of your assets. 

In that case, that would be another good reason to have a shareholders’ meeting. In most scenarios, it’s safe to assume a shareholder is electing directors and attending meetings. That’s our first piece of this corporate puzzle. 

It’s a short one today, unlike a typical shareholder meeting… too soon? 

Well, thank you for joining us today and If you haven’t been to one of our asset protection events in a while, please re-attend and get the updated material. 

As always, take advantage of our free educational content and every other Tuesday we have Toby’s Tax Tuesday, a great educational series. Our Structure Implementation Series answers your questions about how to structure your business entities to protect you and your assets. One of my favorites as well is our Infinity Investing Workshop.

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Got an idea for a future Coffee with Carl? Send it to Carl at cwc@andersonadvisors.com.

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