A Guide to Appointing Officers in a Corporation

Incorporation is a big step for a business and requires a structure that supports new corporate officer roles alongside directors and general employees. It's essential to understand the difference among officers of a corporation shareholders and directors, and how they relate to one another.

In this guide, we'll provide some legal help by breaking down the process for appointing officers in a corporation and tell you what each appointed corporate officer's management role is in a corporate structure.

What is a corporate officer?

Officers of a corporation are senior employees responsible for the management of a company's daily operations, ensuring smooth operations and compliance with a corporation's bylaws and regulations. These day-to-day operations include record-keeping, financial management, staffing, and task delegation. As managers, corporate officers also make many policy decisions required to run things effectively.

What is the difference between officers and directors?

A director takes a more strategic view than other employees, steering an organization to keep it financially healthy so that it delivers a return for the shareholders who fund it. The board of directors, which is elected, represents the ownership interest and makes strategic decisions on behalf of the shareholders rather than overseeing a company's daily operations. The president or CEO reports directly to the board of directors. Shareholders own stock certificates. Directors can be elected or removed at shareholders meetings.

Modern corporate structure maintains a clear distinction between the ownership and the management team. However, an officer can also be a director, attending regular meetings along with the board of directors. In many cases, the president or CEO is also a board member. Corporate officers may also have an ownership interest by holding shares, meaning that they can vote at shareholders' meetings, but this is not mandatory.

There are some differences in what an officer in a corporation and the board of directors can do by law. Only the board of directors can make, amend, or repeal a corporation's bylaws. They can do this during board meetings or via a resolution if they don't want to conduct a regular organizational meeting. Decisions made by directors must be approved at shareholder meetings.

Most states require corporations to have at least one director upon incorporation, but they can also have several other directors. Some states require specific officer positions.

Who are the officers of a corporation?

A corporation's officers typically hold a senior position, and each takes care of specific aspects of the corporation's activities. At the bare minimum, this kind of business structure only needs a single officer. In a small business, one officer might occupy several roles, while a larger business might employ other officers.

There are three common officer roles:

President

The president is a required officer in a corporation. Presidents will have ultimate responsibility for the corporation's daily operations unless there is a separate chief executive officer (CEO), in which case they might focus more on specific aspects of the business. Often in a small corporation, the president is also the CEO. In a large corporation, a vice president reports to the CEO. Each vice president in a corporation often manages discrete areas of the business.

Secretary

The corporate secretary is the linchpin for business affairs and corporate governance. Legal duties include signing the annual return, producing statutory declarations, creating a statement of affairs in case of receivership or winding down, and certifying financial statements in the annual return. The secretary also handles many other governance-related tasks, including informing the corporation's board of regulatory changes, managing accounting and registration duties, and maintaining records in accordance with the law. In addition, the secretary documents meetings.

Treasurer or chief financial officer (CFO)

The treasurer is responsible for the financial control within a business. Treasurers provide services including managing cash flow and preparing accurate, timely financial reports for stakeholders. A treasurer, also known as the chief financial officer (CFO), decides how to invest, oversees capital structure, and plans financial strategies around risk and liquidity on the company's behalf. They also produce economic forecasts and models to guide future strategy in other areas.

Other officers:

Chief executive officer (CEO)

The CEO takes a broad view of company operations, serving as the interface between the corporation and the board of directors, updating them with corporate developments and a top-level view of finances, staff, and product direction.

Chief operating officer (COO)

The chief operating officer (COO) oversees the successful creation of saleable products, whether that's in manufacturing or new service lines. The COO supervises the processes that produce these products and also manages quality control to make sure that customers are getting an acceptable product or service. As such, the chief operating officer and the chief executive officer often will work closely together. In some companies the president and COO will be the same employee.

Chief marketing officer (CMO)

As the head of the marketing department, the chief marketing officer is responsible for building, nurturing, and protecting the brand. CMOs spearhead campaigns that bolster brand awareness and generate sales for the corporation.

Chief revenue officer (CRO)

The chief revenue or chief sales officer brings in money by overseeing and executing sales strategies. They manage targets and analyze sales efficiency to hit business goals. Chief revenue officers will also keep an eye on the future, forecasting sales and planning for adverse conditions that could stop the business from hitting its sales goals.

Chief information officer/chief technology officer (CIO/CTO)

The chief information officer/chief technology officer (CIO/CTO) both focus on technology but serve different sets of users. A CIO manages a company's IT operations and infrastructure, applying technology to improve internal processes and maximize efficiency. Meanwhile, a CTO creates technology products and services to help make customers' lives better. Their roles often overlap, as internal IT processes often affect the customer experience, and both of these officers manage technology issues such as risk, vendor negotiations, and budgeting.

One person often fills multiple roles, especially in small companies.

Does my company need to appoint corporation officers?

The law requires officers to be appointed in an incorporated company. A C corp can have unlimited shareholders and pays corporate tax, while those drawing income from the corporation are also held liable for personal tax. An S corp may only have 100 shareholders but does not pay tax at the corporate level. Both must have officer positions.

A limited liability company (LLC) needs neither officers nor directors. An LLC has members rather than shareholders, and those members can decide on the most appropriate business structures. They might decide to appoint officers, but that is optional.

Are corporation officers legally liable?

Corporations carry a "corporate veil" that protects both officers and directors from personal liability in company affairs. Nevertheless, this doesn't give officers carte blanche to act as they please. They have fiduciary duties to the corporation, meaning that they must act in good faith and preserve the company's best interests.

Officers and directors also have a duty of care to act with a minimum standard of competence. If company audits show that a business failed to meet its legal responsibilities, officers will be expected to demonstrate to audit committees that they conducted appropriate due diligence in carrying out their day-to-day operations. Documenting that they implemented and followed compliance requirements will help to protect them personally in those cases.

Failing to demonstrate due diligence, or failing to act in the company's best interests, could enable other stakeholders, such as shareholders, to hold a person acting as an officer liable for corporate transgressions under the law.

How does a company appoint its officers?

Officers are appointed by the board of directors during incorporation. The company documents the officers' positions and responsibilities in the corporation's articles, bylaws, or resolutions. It is possible for one employee to fill all positions, providing a range of services to the organization. Shareholders and/or directors serve as officers.