Corporate governance is the set of rules, roles, and decision rights that determine how a company is directed and controlled. It defines who decides what, who checks those decisions, and how owners, directors, and managers report to each other. Small companies need it too, in a simpler form.
In practice, governance starts with three questions. Who owns the company, and in what proportion? Who may sign contracts, and up to what amount? Which decisions need approval before they become binding? Write the answers down before you need them.
An example. Two founders each hold 50 percent. They agree that any spending decision above 5,000 needs both signatures, and that anything above 25,000 needs a written shareholder resolution. They meet for one hour on the first Monday of each month and record every decision in a shared document. That two-page document is their governance.
The structure grows with the company. You might add an advisory board of three people who meet four times a year. Later you may add reporting duties, an audit, or a supervisory body, depending on your legal form and size. Investors and lenders often ask about governance during a financing round, because it tells them how decisions will be made after their money arrives.
Here is where founders get it wrong. They treat governance as paperwork for large corporations and skip it. It is really a tool that prevents deadlock. A 50/50 split looks fair until the two owners disagree about firing an employee or accepting an offer. Without a written tie-breaker rule, nothing moves and the disagreement becomes expensive. Agree on the rules while you still agree on everything else. Which requirements are mandatory depends on your country and your legal form.
