StartupJournal has a story based on an NFIB survey showing that S-corp is still the most common form of small business organizational structure. Generally, it is still my choice of default, although there are situations where an LLC or C-corp makes more sense.
What is interesting from this study is that small businesses do not really use their legal boards as they are intended, to provide oversite, with 68% saying they have a board only because they have to under the law.
At first glance this may be alarming, but in reality most small corporations choose to include only shareholders as board members. However, given the legal liability that boards now face, this is probably a wise choice.
If the legal board of directors is only a nominal board and not really providing any oversite, it is critical for entrepreneurs to create an informal advisory board. Objective and honest outside viewpoints helps to keep our thinking clear and our assumptions well tested.
