Assuming you’ve got your Board of Directors in place—that is, your shareholders have had a meeting recently and elected Directors—there are things that a corporation should not do until the Board of Directors authorizes them to be done. These are mostly things that are outside the ordinary course of business, that don’t happen on a regular basis.
They Include:
1. Issuing shares
2. Signing a lease
3. Getting financing (of any kind)
4. Signing an employment agreement with an executive
5. Applying for or obtaining a patent or trademark, or domain name registration
Of course, sometimes things get done in a hurry, and there isn’t time for Directors to approve them beforehand. Or the Owners aren’t in the habit of taking such formal steps. If necessary, acts like these can be approved afterward (shortly afterwards), which is known as ratification. In either case—approval beforehand or ratification afterwards – it should be done in writing, by having the Directors adopt resolutions and attach a copy of the items being approved: the lease, the loan documents, etc.
Remember, the point of having a corporation or LLC is to protect yourself from the liabilities of your business. The more you observe the formalities, the stronger that protection is.
