Services | LLCs & Corporate governance

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Yohanan Law advises entrepreneurs, startups, founder-led businesses, investors, and established companies throughout Brooklyn and New York on corporate governance, board governance, fiduciary duties, and ongoing corporate compliance. Our practice includes board and shareholder governance, governance structuring, fiduciary duty counseling, corporate record maintenance, compliance and risk management, board advisory services, and ongoing legal guidance for growing businesses. Whether you are forming a board of directors, raising outside capital, preparing for investor due diligence, or building governance processes to support long-term growth, we provide practical legal counsel tailored to the needs of founder-led businesses.

Strong corporate governance is about far more than maintaining corporate records or holding annual meetings. The way a company structures its board, documents major decisions, manages conflicts of interest, maintains corporate records, and allocates decision-making authority can directly affect fundraising, acquisitions, ownership disputes, regulatory compliance, and long-term business value. We help businesses establish governance frameworks that reduce legal risk, support informed decision-making, satisfy investor expectations, and position companies for future growth and successful transactions.

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Early-stage startups formalizing governance frameworks

Venture-backed companies scaling operations

Family-owned businesses establishing formal governance

Professional services firms adopting governance best practices

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FAQ

Boards of Directors & Fiduciary Duties

A board of directors is responsible for overseeing the company's overall direction, major strategic decisions, and management team. The board does not typically run the company's day-to-day operations. That responsibility belongs to management. Instead, the board provides oversight, approves significant corporate actions, and helps ensure that the company is being managed in the best interests of its owners.
The board's responsibilities often include appointing and removing officers, approving major financings, acquisitions, sales of the company, budgets, equity issuances, and other significant business decisions. For example, a startup's board may approve a venture capital financing, adopt an employee equity plan, or evaluate a potential acquisition offer. As companies grow and bring in outside investors, the board frequently becomes a central part of the company's governance structure. Investors often negotiate for board seats because board membership provides visibility into the business and influence over important decisions.
In our experience, founders sometimes assume the board is merely a formality. That assumption can create problems as the company matures. A board has real authority, and directors owe fiduciary duties to the company. The composition of the board can significantly affect fundraising, strategic decision-making, founder control, and exit opportunities. Before granting board seats or creating a board structure, founders should carefully consider how decisions will be made and how governance will evolve as the business grows.
Directors generally owe fiduciary duties of care and loyalty to the company and its shareholders. These duties require directors to make informed decisions, act in good faith, avoid conflicts of interest, and put the interests of the company ahead of their personal interests when acting in their capacity as directors. While the exact rules can vary depending on the jurisdiction and circumstances, these principles form the foundation of corporate governance.
The duty of care requires directors to make decisions on an informed basis after considering the relevant facts and risks. The duty of loyalty requires directors to avoid self-dealing and conflicts that could compromise their judgment. For example, a director generally should not steer a corporate opportunity to another business they own or approve a transaction that primarily benefits them at the company's expense. Directors are not expected to make perfect decisions. They are expected to make informed decisions in good faith and with appropriate attention to their responsibilities.
In our experience, founders often assume that once they join a board, they can continue making decisions solely as founders or major shareholders. Board service comes with a different set of obligations. A director's role is not to advocate exclusively for a particular investor, founder, or stakeholder. The role is to exercise independent judgment and act in the best interests of the company as a whole. As businesses grow, raise capital, and add investor-appointed directors, understanding those fiduciary duties becomes increasingly important because many governance disputes stem from confusion about whose interests directors are expected to serve.
Directors reduce risk by staying informed, documenting their decision-making process, identifying conflicts of interest early, and taking their oversight responsibilities seriously. In our experience, most fiduciary duty claims do not arise because directors intentionally acted improperly. They arise because directors failed to ask questions, failed to understand the issues before them, or failed to follow an appropriate decision-making process.
Board meetings should be properly documented, important decisions should be supported by adequate information, and directors should not hesitate to seek advice from management, accountants, consultants, or legal counsel when evaluating significant transactions. For example, if the company is considering a major financing, acquisition, sale, or related-party transaction, directors should understand the risks, alternatives, and potential impact on the company before approving the transaction. Good records can be just as important as good decisions because they help demonstrate that directors fulfilled their responsibilities.
Conflicts of interest deserve particular attention. A founder-director, investor-director, or director affiliated with another business may have interests that differ from the company's interests in a particular situation. In our experience, the most common governance problems arise when directors treat board decisions informally or assume that good intentions alone are sufficient. Directors who prepare for meetings, disclose conflicts, ask difficult questions, and create a clear record of their deliberations are generally in a much stronger position than directors who simply approve management recommendations without meaningful review.
Many startups begin with a small group of founders making decisions informally. As the company grows, however, that approach often becomes less practical. A formal board of directors is commonly established when the business raises outside capital, brings on investors, adds multiple owners, or begins making decisions that carry significant financial, legal, or strategic consequences. In many venture-backed companies, the first institutional financing round is the point at which a formal board becomes a necessity rather than an option.
A board can provide oversight, accountability, and strategic guidance as the business becomes more complex. For example, a company preparing for a major fundraising, acquisition, expansion initiative, or leadership transition may benefit from having a structured governance process and experienced directors involved in key decisions. Investors frequently request board seats because they want visibility into the company's operations and a voice in major corporate actions.
In our experience, companies should not create a board simply because they think it makes them look more sophisticated. A board has real authority and fiduciary responsibilities. The better question is whether the business has reached a stage where formal governance would improve decision-making and oversight. For some founder-led businesses, that point may come when outside investors arrive. For others, it may come when ownership becomes more dispersed, strategic decisions become more complex, or the company begins preparing for substantial growth, fundraising, or a future exit.
A board of directors and an advisory board can both provide guidance to a company, but they serve very different functions. A board of directors is a formal governing body with legal authority to make or approve certain corporate decisions. Directors typically owe fiduciary duties to the company and its shareholders, and their actions can have significant legal consequences. An advisory board, by contrast, provides advice and expertise but generally has no authority to make decisions on behalf of the company.
A board of directors may approve financings, acquisitions, equity issuances, executive compensation, major contracts, and other significant corporate actions. Advisory board members typically do not vote on corporate matters and do not exercise control over the business. Instead, they may provide industry expertise, strategic guidance, introductions to customers or investors, technical knowledge, or mentorship to management. For example, a healthcare startup might create an advisory board of physicians and industry executives, while reserving actual decision-making authority for its board of directors.
In our experience, founders often prefer advisory boards during the early stages of a company's growth because they can benefit from experienced advisors without giving up governance rights or board seats. Advisory boards can be extremely valuable, but founders should not confuse them with formal governance structures. If an investor, founder, or executive wants actual authority over major company decisions, that discussion typically involves the board of directors. If the goal is guidance, expertise, and strategic input, an advisory board may be the better fit. The distinction matters because one group advises management while the other has the power to oversee and, in some cases, direct it.

Governance Structure & Decision-Making

The right board structure depends on the company's size, ownership, stage of growth, and long-term objectives. In our experience, many founder-led businesses make one of two mistakes: either they create a board that is too informal to provide meaningful oversight, or they give away too much control too early without fully considering the long-term consequences. A board should be structured to provide accountability and strategic guidance while still allowing management to operate the business effectively.
For early-stage companies, a small board is often preferable. A typical structure might include one or more founder representatives and, if outside capital has been raised, one investor representative. As the company grows, independent directors can become increasingly valuable. Independent directors often bring industry expertise, operational experience, and an objective perspective that neither founders nor investors can always provide. Many successful companies eventually adopt a balanced structure that includes founder directors, investor directors, and independent directors.
In our experience, founders should think carefully before granting board seats because board composition can influence major decisions for years. A board approves significant matters such as financings, acquisitions, equity issuances, executive hiring, and potential sales of the company. The question is not simply who owns the most stock. The question is who will have influence over the company's most important decisions. A thoughtfully structured board should promote sound governance, provide meaningful oversight, and support the company's long-term growth without creating unnecessary gridlock or shifting control in ways the founders did not anticipate.
Smaller boards are typically usually more effective than larger ones. Many startups and privately held companies operate successfully with three to five directors. A smaller board can make decisions more efficiently, reduce administrative complexity, and minimize the risk of deadlock. As the company grows, raises capital, or becomes more operationally complex, additional directors can be added to bring new expertise and perspectives.
A common structure for a venture-backed company is a three-person board consisting of one founder representative, one investor representative, and one independent director. As additional financing rounds occur, the board may expand to five or seven members to accommodate new investor representatives and independent directors. Founder-led SMBs and lower middle-market companies often use a similar approach, balancing owner representation with experienced independent voices who can provide objective guidance.
In our experience, companies should focus less on the number of directors and more on whether the board has the right mix of skills, experience, and perspectives. A seven-person board that cannot reach consensus is often less effective than a three-person board that functions well. At the same time, a board made up entirely of founders or insiders may lack the independent judgment needed to navigate significant challenges. The goal is to create a board large enough to provide meaningful oversight and expertise, but small enough to remain efficient and decisive as the company grows.
In our experience, companies should consider adding independent directors when major business decisions begin affecting multiple stakeholder groups, not just the founders. This often occurs during a significant fundraising round, a period of rapid growth, preparation for an acquisition, or when the company reaches a level of operational complexity that would benefit from outside expertise. Independent directors can provide an objective perspective that founders and investor representatives may not always be able to offer.
Independent directors are particularly valuable when a board includes both founder and investor representatives. Founders naturally want to maximize long-term growth and maintain flexibility. Investors may have different priorities depending on their investment timeline, fund structure, or return expectations. An experienced independent director can help bridge those perspectives and focus discussions on what is best for the company as a whole. For example, an independent director may provide valuable guidance during a financing, acquisition offer, leadership transition, or strategic dispute among key stakeholders.
In our experience, companies often wait too long to add independent directors. Many founders view board seats as something to protect rather than an opportunity to strengthen governance. The right independent director can bring industry expertise, operational experience, credibility with investors, and a level of objectivity that is difficult to replicate internally. The key is selecting someone who adds genuine value to the business rather than simply filling a seat. A strong independent director should be capable of challenging management when necessary while also serving as a trusted advisor during critical moments in the company's growth.
The specific decisions requiring board approval depend on the company's governing documents, ownership structure, and stage of growth. In general, boards are responsible for overseeing major corporate actions rather than managing day-to-day operations. In our experience, one of the most common governance mistakes is failing to clearly distinguish between decisions management can make independently and decisions that should be escalated to the board.
Board approval is commonly required for significant matters such as raising capital, issuing equity, approving stock option plans, incurring substantial debt, entering into mergers or acquisitions, selling significant assets, approving annual budgets, hiring or terminating senior executives, adopting major strategic initiatives, and selling the company. For example, management may have authority to negotiate a financing, but the board typically approves the final transaction. Similarly, management may recommend an acquisition, but the board often decides whether the company should proceed.
In our experience, the best governance structures reserve board approval for decisions that materially affect the company's ownership, finances, strategy, or risk profile. If every operational decision requires board approval, management cannot operate efficiently. If too few decisions require board oversight, the board cannot effectively fulfill its responsibilities. The goal is to create a clear division of authority: management runs the business day-to-day, while the board focuses on the major decisions that could significantly impact the company's future. As companies grow, raise capital, and add outside directors, clearly defining those responsibilities becomes increasingly important.

Corporate Records & Governance Maintenance

Every company should maintain accurate and organized corporate records from the beginning. In our experience, poor recordkeeping is one of the most common issues uncovered during investor due diligence, acquisitions, audits, ownership disputes, and other significant business events. Many companies operate successfully for years with incomplete records, only to discover the problem when a lender, investor, buyer, or regulator requests documentation that should have been maintained all along.
At a minimum, companies should maintain formation documents, governing documents, ownership records, capitalization tables, stock certificates or membership interest records, board and shareholder consents, meeting minutes, major contracts, financing documents, equity issuance records, intellectual property assignments, employment agreements, tax filings, and regulatory filings. For example, if a company issues stock to founders, employees, advisors, or investors, it should maintain clear documentation showing who received equity, when it was issued, and what approvals were obtained. Similarly, major corporate actions such as financings, acquisitions, option grants, and governance changes should be properly documented and retained.
In our experience, corporate recordkeeping is often treated as an administrative task until a major transaction occurs. That is a mistake. Buyers, investors, and lenders frequently view disorganized records as a sign of broader operational risk. Companies with clean corporate records typically move through fundraising, due diligence, and acquisition processes more efficiently and with fewer surprises. Good recordkeeping is about preserving the company's ability to grow, raise capital, attract investors, and respond effectively when opportunities arise.
Board minutes and written consents create the official record of a company's major decisions. In our experience, many founders view them as administrative paperwork until a financing, acquisition, audit, lawsuit, or investor diligence process occurs. At that point, these records often become some of the most important documents in the company. They help demonstrate what decisions were made, when they were made, who approved them, and whether proper corporate procedures were followed.
For example, when a company issues stock, adopts an equity incentive plan, raises capital, approves a major contract, hires a senior executive, or enters into an acquisition, those actions are often reflected in board minutes or written consents. If the company cannot demonstrate that the proper approvals occurred, investors, lenders, buyers, or opposing parties may question the validity of those actions. We frequently see diligence requests asking for years of board and shareholder approvals because sophisticated investors and buyers want to verify that the company has been properly governed.
In our experience, board minutes and written consents are not valuable because they satisfy a technical legal requirement. They are valuable because they create clarity and reduce risk. They help establish that directors fulfilled their fiduciary duties, that corporate actions were properly authorized, and that the company followed appropriate governance procedures. Companies with incomplete governance records often spend significant time and money recreating historical approvals during a financing or acquisition. Companies that maintain good records from the outset generally avoid those problems and move through major transactions much more efficiently.
Poor corporate recordkeeping can create problems long before a lawsuit, audit, or acquisition occurs. In our experience, companies often operate for years with missing approvals, incomplete equity records, undocumented ownership transfers, or poorly maintained governance documents without realizing the risk. The issue usually surfaces when an investor, lender, buyer, regulator, or disgruntled stakeholder asks the company to prove that a particular action was properly authorized.
For example, a company may discover that stock was issued without the required board approvals, investor rights were never properly documented, ownership records are inconsistent, or important contracts cannot be located. During a financing or acquisition, these issues can delay the transaction, increase legal costs, reduce valuation, or cause investors and buyers to question the company's overall management practices. We have seen transactions spend weeks or months reconstructing corporate records that should have been maintained from the beginning.
The biggest risk is uncertainty. Investors want confidence that they know who owns the company. Buyers want confidence that equity was properly issued and major corporate actions were validly approved. Directors want confidence that governance procedures were followed. Companies with incomplete records often create doubt where none should exist. Maintaining accurate corporate records is one of the simplest ways to reduce risk, streamline future transactions, and avoid expensive cleanup projects when capital, buyers, or other opportunities are on the line.

Compliance & Risk Management

Compliance becomes more challenging as a company adds employees, enters new markets, signs more contracts, raises capital, and expands its operations. In our experience, most compliance problems do not arise because management intentionally ignored legal requirements. They arise because the business outgrew the systems and processes that worked when the company was smaller. What was manageable with five employees can become a significant risk with fifty.
Growing companies should regularly review their corporate governance practices, employment policies, contract management procedures, regulatory obligations, data privacy practices, intellectual property protections, and recordkeeping systems. For example, a company that hires additional employees may need updated handbooks, wage-and-hour compliance procedures, and worker-classification reviews. A business raising outside capital may need to improve corporate recordkeeping, maintain an accurate cap table, and ensure all prior equity issuances were properly documented. Companies operating in regulated industries such as healthcare, insurance, or financial services often face additional compliance requirements that become more complex as they scale.
In our experience, the most effective compliance strategy is proactive rather than reactive. Businesses should periodically evaluate their legal risks instead of waiting for a dispute, audit, investor diligence request, or regulatory inquiry. Companies that establish clear policies, maintain accurate records, train managers appropriately, and seek legal guidance before major decisions are generally in a much stronger position than companies that address compliance issues only after a problem surfaces. Compliance is an ongoing process that should evolve alongside the business.
In our experience, the most common governance mistake is treating corporate formalities as unimportant because the owners trust each other. Many founder-led businesses operate informally for years, making major decisions through conversations, text messages, or emails without documenting approvals or maintaining proper records. That approach may seem efficient in the short term, but it often creates problems during financings, acquisitions, ownership disputes, or investor due diligence.
Another frequent mistake is failing to clearly define decision-making authority. Founders and owners often assume everyone shares the same understanding of who can hire employees, issue equity, take on debt, enter into major contracts, or approve significant expenditures. Disputes frequently arise when expectations were never documented. We also see companies neglect board meetings, fail to maintain accurate cap tables, issue equity without proper approvals, ignore conflicts of interest, or wait too long to establish governance procedures that match the company's growth and complexity.
In our experience, governance problems rarely become visible when business is going well. They become visible when the company raises capital, brings in new owners, faces a dispute, receives an acquisition offer, or encounters financial challenges. The businesses that navigate those events most successfully are usually the ones that invested in governance before they were forced to. Good governance is not about creating bureaucracy. It is about creating clarity, accountability, and a decision-making framework that allows the company to grow without unnecessary legal and operational risk.
Strong corporate governance helps ensure that important decisions are made thoughtfully, documented properly, and aligned with the company's long-term interests. In our experience, governance is often viewed as an administrative burden until something goes wrong. The reality is that many legal disputes, ownership conflicts, financing delays, and operational problems can be traced back to poor governance practices rather than bad business decisions.
Good governance creates clear rules regarding who has authority to act on behalf of the company, what approvals are required for major decisions, how conflicts of interest are handled, and how important actions are documented. For example, a company with accurate corporate records, an up-to-date cap table, clear board procedures, and properly documented approvals is generally far less likely to encounter problems during investor due diligence, an acquisition, a shareholder dispute, or a regulatory review. Governance also helps directors and officers demonstrate that they fulfilled their fiduciary responsibilities and acted in the company's best interests.
In our experience, the greatest benefit of strong governance is that it reduces uncertainty. Investors are more comfortable investing in companies with organized records and clear decision-making processes. Buyers are more comfortable acquiring companies that can demonstrate proper ownership and corporate approvals. Founders and owners are less likely to become involved in costly disputes when expectations and authority are clearly defined. Good governance does not eliminate risk, but it helps companies identify issues earlier, make better decisions, and respond more effectively when challenges arise. As businesses grow, those benefits often become increasingly valuable.

Updated August 2026