The Delaware General Corporation

A general corporation is the most common type of corporation. In many situations, a general corporation, often referred to as a stock corporation, open corporation or C corporation, is recommended when a company goes public or plans a private offering of stock.

Delaware general corporations are also typically used when a company wants to attract venture capital funding. It is easier for general corporations to generate capital since they have the ability to sell stock and can be easily transferred from shareholder to shareholder.

So what is a general corporation? A general corporation has three tiers of power: shareholders, directors and officers. Each of these groups has different rights and responsibilities within the corporation.

General Corporation Structure

Shareholders

A general corporation shareholders are the owners of the company, but they do not manage the company. Typically, holders of common stock receive one vote for each share they own, and they have the right to help elect the members of the Board of Directors. They can also vote on certain other matters of major significance to the company.

Any stockholder who holds a majority of the shares of issued stock can control the company. This is sometimes referred to as a "majority shareholder." Majority shareholders possess a larger amount of responsibility than minority shareholders.

Any stockholder without a controlling role in the company is referred to as a "minority shareholder." Generally, minority shareholders bear no responsibility to the company, and they are able to assign, or give, their votes to anyone they choose. They can also sell their stock whenever they want.

Shareholders are rewarded in two ways: first, by the dividends paid on their stock when and if the Board of Directors declares a dividend; and second, by the increased value of their stock as the company grows.

Directors

The Directors run the company and are responsible for the company's overall management. They take responsibility for all major business actions, such as the issuance of stock, the election of officers, the hiring of key management, the establishment of corporate policies' and the setting of their own and key officers' salaries and compensation packages.

The Board of Directors decides if a dividend will be given to the shareholders and, if so, how much. Individual directors may own stock in the company.

Directors have certain fiduciary responsibilities to the company. They must be loyal to the company; they must make informed, independent decisions as Board members; they must not act in bad faith, such as self-dealing or fraudulent dealings; and they must act in the best interests of the company and its shareholders.

Directors may make decisions and take action in pre-announced meetings with a quorum present, or without a meeting by unanimous written consent of all Directors. Directors cannot give or sell their votes to other directors, nor can they vote by proxy.

Ordinarily, Directors may be removed and replaced—with or without cause— by the majority vote of the shareholders. This is why a majority stockholder can control the company.

Officers

The officers of the company work for the Board of Directors and handle the day-to-day business of the company. Officers carry out the Board's decisions and implement the Board's policy. Officers are usually the President, Vice President, Secretary and Treasurer. However, as it sees fit, the Board may appoint other officers, such as a C.E.O., C.F.O., Sales Manager, Operations Manager or any other title it wishes to create.

Officers may be compensated with stock, or they may purchase stock in the company at the discretion of the Board of Directors.

How to Form a Delaware C-Corp

Forming a Delaware general corporation is made easy with the help of Harvard Business Services, Inc. Navigate to the corporation formation form below when you’re ready to get started.

1. Choose a business name. Make sure to create a name that is compliant with Delaware naming standards.

2. Designate your Delaware Registered Agent

3. File your Delaware Articles of Incorporation

4. Form your Board of Directors and host your first board meeting

5. Issue stock to shareholders 

6. Apply for your EIN with the IRS

Keep in mind that with Harvard Business Services, Inc. as your registered agent, we can help complete all of these steps to make the process seamless for any first-time business owners.

Key Elements of a General Corporation

• Three tiers of power: shareholders, Directors, officers
• Clear separation of rights and responsibilities
• No limit to size
• Directors manage the company
• Directors are elected by the shareholders
• Shareholders own the company
• Minority shareholders are not responsible for the company
• Can be subchapter S if all qualifications are met and an IRS Form 2553 is filed in a timely manner

General Corporations are Frequently Used For

• Companies that want to go public
• Raising capital
• Purchasing other companies
• Transacting business globally