FORTUNE Small Business:

An advisory board or a board of directors?

Find out which one is best for your company.

By Winna Ironkwe, FSB contributor

(FSB Online) -- Dear FSB: I would like to set up an advisory board for my trading company that would make decisions in corporate matters. I don't want a board of directors. I want to pay each director in shares of stock, rather than salaries. Is this a realistic plan?

- M. Laurence, Scarborough, Maine

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Dear M. Laurence: You can very easily organize an advisory board made up of professional contacts with the know-how to help you run your business better. However, these experts would be overstepping their role if they made decisions on corporate matters, says Anita Campbell, founder and president of Anita Campbell Associates, a Medina, Ohio--based consulting firm that specializes in strategic planning. "An advisory board has no authority to act on behalf of the company" she says.

Generally, such a group exists only to offer ideas to the business owner.If you really need a team to vote on corporate decisions, then a board of directors would make sense, says Campbell. But understand that this is not a small commitment. "If the advisory board is not working out, you can simply discontinue it or bring in new advisors," says Campbell. "It may be extremely difficult to get rid of a board of directors if you change your mind about having one later on. Under certain conditions, the directors can fire management or bring in new leadership, not the other way around."

As far as compensation goes, you can award shares in your company to an advisory board, though members usually volunteer their time for free. A board of directors is almost always compensated in some way. Top of page

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Market indexes are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer Morningstar: © 2014 Morningstar, Inc. All Rights Reserved. Disclaimer The Dow Jones IndexesSM are proprietary to and distributed by Dow Jones & Company, Inc. and have been licensed for use. All content of the Dow Jones IndexesSM © 2014 is proprietary to Dow Jones & Company, Inc. Chicago Mercantile Association. The market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. FactSet Research Systems Inc. 2014. All rights reserved. Most stock quote data provided by BATS.