The Delaware General Corporation has been the strongest form of company organization in the United States since the late 18oo’s when major entities like the railroads, Standard Oil and DuPont needed to organize into organizational structures that would provide for the governance of the company, as they grew beyond the lives of their famous founders. The General Corporation is perfectly designed as a vehicle for engaging in business, and it also provides a way to raise capital as needed throughout the life of the company.

In its simplest form, the General Corporation has three tiers of power; The Shareholders, The Directors and The Officers. The Shareholders “OWN” the company. The Directors “MANAGE” the company and the Officers “RUN” the company on a day-to-day basis.  The Bylaws of the company set forth the powers and the limits of power in each of the tiers. Each group may have separate priorities and they may clash occasionally. When one tier rises up against the others, a takeover battle may ensue. Takeover battles are usually fought in the Delaware Court of Chancery. In this unique business court a single judge decides the case. No juries, no tribunals, no 12 angry men. One judge determines quickly which party shall prevail according to 200 years of laws and legal precedents. It is said that the Chancellors of the Court respect the good-faith decisions of Directors over the profit priorities of shareholders, but a majority of shareholders can generally elect a new board of directors if they don’t like the ones they’ve got.

The “Rules” about how these three categories interact with each other is contained in three general knowledge bases. The “code”, which is the written law passed by the State Legislature, in this case called the “Delaware General Corporation Law” (DGCL); the “case law” handed down by the Delaware Court of Chancery and the Delaware Supreme Court over the past 200 years and in the “Letter Rulings” which are individual judicial decisions on a myriad of minute details that come up in a court case.

Stockholders are granted two “rights” that directors and officers don’t get: The right to vote for the Board of Directors, and the right to share in the dividends of the company in their pro-rata share when the Directors declared dividends. The shareholders, however, cannot operate the company. They cannot walk in and start telling people what to do. They act in a meeting, not individually. (Unless one person owns more than 50% of the company. In that case she could control the entire company and all three tiers of power.)

The Board of Directors also acts in meetings. Directors don’t generally act individually. Meetings must be announced in advance to all Directors and must contain a majority of directors present to be a legal meeting.  The Board of Directors makes all the important decisions in the company. They are responsible for company policy and oversee the managers. The Directors determine what the company will do with its profits and they control the sale of stock in the company. They hire the Officers of the company to run the business on a day-to-day business.

The Officers work at the pleasure of the Board of Directors, or by contract with the Board. Officers are usually the President, Vice President, Secretary and Treasurer, but the company’s bylaws can prescribe any officers and their titles, responsibilities and duties.  Officers are responsible for the conduct of the company and the profitability. If they fail, they get booted out quickly. If they succeed, they become superstars.

This unique structure, with three mandatory tiers of power, deserves a great deal of credit for the success of the American industrial revolution, the American economy since 1900 and the whole business of Wall Street itself. This structure differs greatly from other forms of company organization such as the sole proprietorship or the partnership, which precede it; and the Limited Liability Company which followed it historically.

If your vision is to form a big company, like Apple or Google or Dell you couldn’t pick a better vehicle to take the ride with than a Delaware General Corporation.