Forums: Discussions for entrepreneurs and small business.

Hello everyone.
I was just asked this today by a customer of mine and i would love to get some input from the community.
here is the scenario, she is young, been a soleproprietor for a few years, but now wants to Incorporate. her question to me was "How do I choose my board of directors" Although, I gave her a few answers to think about. I would love to hear from you guys. How do you choose your board of directors, and what is the key component to look for? Please help me find answers for her.
Thank you

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Edgar Monroy
Web Developer / Owner / Consultant
When starting your own business the need to "know-how" is greater than money!
http://www.nuevolution.net

I`m sorry, This makes no sense to me.
A board of directors is elected by the owners to choose the CEO and look out for the interests of the stockholders. The owners are the stockholders.  She will be the stockholder, so she simply elects herself to be on the board. The board for a small S-corp is usually a formality.

Yes, if there are 1,000s of owners then there can be a conflict of interest, but if there is just 2 or 3 people then this is very common. Her motive in picking a board is to protect the owner (stockholder) ... who better than herself? It`s important to remember that the board can decide you are doing a bad job and fire you!  Remember Steve Jobs. He didn`t leave apple, the board told him to go.
If she just wants a board to give advice ... find a good mentor... that` a whole different post.

best to check out NOLO Press for more info,

I did mention NOLO to her.
See, she wants formality I guess.. She doesn`t want to be the only one in her board, she wants 4 people, what she is concerned is whether the people she picks are capable of delivering.
I hear what you are saying. But honestly, I don`t know if you are Inc. But I had the same troubles of finding who was fit to be in my board of directors. In the end I chose Close friends with High Ranking and High Educational background. But Honestly, you can`t just choose your drinking buddy...if you drink.... Honestly how do you know who is right.. that is the question... Nolo only tells you what you need to do...

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Edgar Monroy
Web Developer / Owner / Consultant
When starting your own business the need to "know-how" is greater than money!
http://www.nuevolution.net

When my sister incorporated her business she simply listed the people she trusted most as members of her board of directors.  None had actual stock in the company - but served in more of a business advisor capacity. She selected our Dad, her accountant, her attorney and her banker.  Her biggest concern was in regards to the future of the business should something happen to her and she was unable to continue to run the company.  The individuals selected would be able to handle the situation in such a case.

- J.




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Jeff Fisher | Jeff Fisher LogoMotives | Tweet! Tweet!

I used to be an Inc. That was over a decade ago. I don`t remember if there was a board or not. If there was, it was just me. I never needed to pick people.



If she is looking for many new investors, then the question becomes relevant, but until then, the Board is simply a formality.

A growing problem these days that many corporations face is making sure anyone serving on their Board of Directors isn`t serving elsewhere in that same capacity.  Not only does it create a potential conflict of interest but it`s usually not a good idea to hire someone who is already minding someone else`s shop.   Typical exceptions to this rule are retired businessmen with "star power" (Warren Buffett serves on multiple boards at many top corporations, for example) or board members who own actual stock in the corporation.

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"Forget inspirational quotes to keep you going. If by doing what you do, you get an hour every day to relax, be with the ones you love in comfort without doing wrong, then it is all worth it." -Anon.

I would suggest looking for local groups that share some of the same motivations or interests as you do.  Usually you can find a couple people that will really challenge you to action. Those are the type of people you would want on a Board of Directors. Look into joining a Toastmasters club or an Optimists Club. There are usually a great number of people in those groups that are veterans in something usefull. Of course if there are other shareholders, then you are going to want them on the board because they will be the most motivated to see you succeed. Just some suggestions. Best Wishes!

David,
Warren Buffett is an exception, I think that what he gets paid per year, he can afford good lawyers that protect his interests...


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Edgar Monroy
Web Developer / Owner / Consultant
When starting your own business the need to "know-how" is greater than money!
http://www.nuevolution.net

That`s exactly what I said.  If you`re trying to get a board for a small but growing company, try to get people who buy in (literally) to  the entrepreneurial vision.  Otherwise, you`ll wind up business-minded investors who will jump at the first liquidity opportunity and convince everyone to sell.  I`ve heard so many horror stories where an entrepreneur who spent years building a company had it yanked out from under them because the board didn`t believe in the company.

What did your friend decide on for her board of directors?

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"Forget inspirational quotes to keep you going. If by doing what you do, you get an hour every day to relax, be with the ones you love in comfort without doing wrong, then it is all worth it." -Anon.