Corporate governance for first-time founders: boards, bylaws, meetings, and annual filings

Understanding Corporate Governance Requirements for US Startups

Moving from a project to a formal company introduces a new vocabulary of terms like "bylaws" and "fiduciary duty." It’s easy to view these as bureaucratic hurdles, but corporate governance requirements are better understood as the essential operating system for scaling your business, attracting investment, and making sound decisions. Getting the corporate governance requirements for US startups right from the beginning prevents significant headaches during future fundraising or M&A diligence. It’s about building a stable foundation that supports, rather than restricts, rapid growth.

This structure provides clarity for founders, investors, and the team, ensuring everyone is aligned on the mission and their respective responsibilities. Good governance is not about restriction; it is about creating a clear, predictable framework for success.

Structuring Your Board of Directors: Composition and Responsibilities

A durable company starts with two foundational pillars: your Board of Directors and your corporate bylaws. The first defines who makes the highest-level strategic decisions, and the second defines the rules by which they operate. Getting this initial structure right is a significant strategic advantage.

Founder Legal Obligations and Fiduciary Duty

Your first priced round transforms your board from a simple formality into a strategic asset. A Board of Directors' primary legal duty is to act in the best interest of the corporation and all its shareholders, not just a specific group like the founders or a lead investor. This fiduciary responsibility underpins all its actions, from approving budgets to hiring or firing a CEO. It consists of two core components: the Duty of Care (acting in an informed and reasonable manner) and the Duty of Loyalty (putting the company's interests ahead of personal interests).

Choosing Board Members for Your Seed Stage Startup

The reality for most Seed-stage startups is more pragmatic: the board is your first line of strategic support. Its composition is one of your most critical early decisions. For a Seed round, a three-person board is standard and provides founders with control.

A typical 3-Person Seed Stage Board consists of:

• Founder Seat: Usually held by the CEO, representing the founding team's vision and day-to-day leadership.
• Investor Seat: Held by your lead investor, providing crucial market insight, network access, and accountability.
• Common/Founder-Friendly Seat: This seat is key. It is elected by the common stockholders (the founders and employees) and is often held by a co-founder or a trusted, founder-friendly independent advisor. This structure gives the founders majority control (2-1) in board votes.

Scaling the Board for a Series A Round

As you grow and raise a larger round, the board expands to reflect new stakeholders. For a Series A, the board typically grows to five members to accommodate new investors and add outside expertise.

A typical 5-Person Series A Board consists of:

• Founder Seats: Often the CEO and another key founder or executive, maintaining strong operational representation.
• Investor Seats: Your lead Seed and lead Series A investors each take a seat, representing the major capital partners.
• Independent Seat: This director is mutually agreed upon by both founders and investors. They should not be an employee or a major investor. A great independent adds specific industry experience (e.g., a biotech veteran for a deeptech drug discovery platform) or functional expertise (e.g., a former SaaS CRO for a B2B startup) that the company lacks. They provide an objective voice and can break ties, making their selection a crucial part of maintaining a healthy board dynamic.

Corporate Bylaws Basics: The Company's Rulebook

If you used a service like Stripe Atlas or Clerky for incorporation, you received a lengthy bylaws document. It can feel intimidating, but its purpose is straightforward. Your bylaws are the internal operating manual for your company. They are less about day-to-day business and more about the mechanics of corporate procedure. At its core, corporate bylaws define the roles of directors and officers, how votes are taken, and how meetings are conducted.

Key Provisions to Understand in Your Bylaws

You do not need to memorize all 30 pages, but you should know where to find a few key provisions, as investors and acquirers will review them during due diligence.

• Board Size and Composition: The bylaws will state the authorized number of directors, which you’ll amend as the board grows. This provision is checked to ensure your current board is properly constituted.
• Quorum and Voting: They specify how many directors must be present for a meeting to be valid (the quorum) and what constitutes a passing vote, which is typically a simple majority. This prevents a small minority from making decisions without proper representation.
• Officer Roles: Bylaws outline the key corporate officers. Officer duties defined in bylaws typically include CEO, President, Secretary, and Treasurer. In an early-stage startup, one person often wears multiple hats. The CEO is often also the President and Treasurer, while the Secretary role, responsible for corporate records, might be handled by a founder or the company’s outside legal counsel. This structure formalizes decision-making authority.
• Meeting Procedures: They detail the rules for calling meetings, providing proper notice, and holding annual shareholder meetings. Understanding these basics helps you avoid simple procedural mistakes that could invalidate important board decisions.

Managing Annual Corporate Governance Requirements for US Startups

With your structure in place, governance becomes a recurring operational rhythm. This rhythm consists of holding formal meetings to make decisions and completing the necessary paperwork to stay compliant. This ongoing process ensures your corporate "house" stays in order as you scale.

Board Meetings vs. Shareholder Meetings: A Common Point of Confusion

A common point of confusion for first-time founders is the distinction between board meetings and shareholder meetings. They serve different purposes and involve different people.

Board Meetings are for management and strategy. The attendees are only the directors. The agenda covers business performance, strategic decisions, budget approvals, key hires, and stock option grants. Seed-stage companies should hold at least two to four documented board meetings per year. As you mature, most Series A and B companies hold board meetings quarterly. This regular rhythm provides accountability and a forum for high-level guidance.

Shareholder Meetings are for major corporate actions that require stockholder approval. The primary example is the annual meeting to elect the board of directors. Other matters, like amending the company's charter or approving a merger, also require a shareholder vote. For most venture-backed startups with a small number of shareholders, this is often handled via a written consent form rather than a physical meeting.

The Governance Compliance Checklist

Staying compliant is not complex, but it requires discipline. Three components are essential to meet basic governance compliance for startups.

1. Notice of Meeting: Before any official board or shareholder meeting, you must provide formal written notice to all eligible attendees as specified in your bylaws, for example, 10 days in advance. This is a legal requirement ensuring no one is excluded from decision-making.
2. Meeting Minutes: This is the official written record of the meeting. Minutes are not a word-for-word transcript. They should be concise, documenting who attended, what was discussed at a high level, and most importantly, any formal decisions or resolutions that were voted on. For example, a resolution might look like this:

RESOLVED: That the Board of Directors hereby approves the grant of 10,000 stock options to Jane Doe, pursuant to the Company's 2024 Equity Incentive Plan.

1. Keeping clean minutes is critical for future due diligence. Investors and acquirers will review them to verify that key decisions, like stock issuances, were properly authorized. This simple discipline will be invaluable during your next fundraise.
2. Annual Filings: Every US corporation must maintain its good standing with the state where it's incorporated. For most tech startups, this is Delaware, which requires an Annual Report and franchise tax payment. The deadline is typically March 1st. Missing this can result in penalties and loss of good standing, which can complicate financing or other corporate actions.

Practical Takeaways for Strong Startup Governance

Corporate governance should not be a source of anxiety. It is the framework that enables a SaaS company to scale its sales team, a biotech startup to manage its R&D budget, or an e-commerce brand to secure inventory financing. It builds the trust that investors and partners rely on.

Here are four practical steps you can take today:

1. Map Your Board: Look at your current board structure. Does it align with your company stage? If you have just raised a Seed round, confirm you have a 3-person board that gives founders control. If you are post-Series A, begin identifying candidates with relevant expertise for your independent director seat.
2. Review Your Bylaws Highlights: You do not need to read them cover-to-cover. Find the sections on the Board of Directors, Meetings of Stockholders, and Officers. Understand the basics: your board size, quorum requirements, and the official roles.
3. Systematize Your Meetings: Schedule your board meetings for the next year. Create a simple, shared folder (e.g., "Corporate Records") in a secure cloud service. For each meeting, create two documents: a "Notice and Agenda" and a "Minutes" template. This establishes a professional rhythm.
4. Calendar Your Compliance Deadlines: Find your state's annual report deadline (e.g., Delaware's March 1st deadline for franchise tax) and put it on your calendar with a two-week reminder. Your future self will thank you.

For a broader view, see our hub on legal structures and reporting rules. Ultimately, good governance is about creating clarity and accountability. It's a system that protects the company, its founders, and its investors, allowing you to focus on what matters most: building a great business.

Frequently Asked Questions

Q: Can the board fire a founder CEO?

A: Yes. The board's fiduciary duty is to the corporation and its shareholders. If the board determines that a change in leadership is in the company's best interest, it has the authority to remove any officer, including the CEO. This is why a founder-controlled board at the early stage is a common protective measure.

Q: What is the most common governance mistake early-stage startups make?

A: The most common and costly mistake is poor record-keeping. Missing board minutes, unsigned written consents, and poorly documented stock option grants create significant and expensive legal problems during fundraising or M&A due diligence. A simple and consistent process for documentation avoids these issues.

Q: Does my startup need Directors and Officers (D&O) insurance?

A: While not legally required, it is highly recommended once you add outside directors to your board. D&O insurance protects directors and officers from personal liability related to their duties, making it far easier to attract experienced independent directors who expect this protection.

Q: Do we need to hold a physical shareholder meeting every year?

A: Generally, no. Most venture-backed startups incorporated in Delaware satisfy annual shareholder meeting rules through a written consent signed by stockholders holding a majority of shares. This document handles key actions like electing directors and is far more efficient than organizing a formal meeting.