A corporation is a legal person with the characteristics of limited liability, centralization of management, perpetual duration, and ease of transferability of ownership interests. The owners of a corporation are called “shareholders.” By utilizing the corporate form, the shareholders’ personal assets are protected from debts and liabilities related to the operation of the corporation.
In addition to the shareholders, the board of directors – elected by the shareholders – act as the corporation’s governing body and manage the business and affairs of the corporation. The board of directors also sets the financial and business policy of the corporation, establishes corporate policy, and elects officers of the corporation. The officers are elected by the board of directors. The officers manage the day-to-day operations of the corporation. In a closely held corporation, the shareholders usually act as both the directors and officers.
Texas corporate law does provide for shareholders to enter into shareholders’ agreements to eliminate the directors and provide for management of the corporation by shareholders.