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What are Corporate Bylaws?
When a company has become incorporated, the corporation’s board of directors will adopt a set of corporate bylaws that act as detailed rules for the company.
Corporate bylaws are an important part of corporate governance because they detail how the company will be run. Bylaws will include rules about the management structure, meeting requirements, stock issuance, and other important company policies.
Corporate bylaws can be thought of as the operating manual for a company. They will dictate procedures and standards that the company will follow. Bylaws will state what a company can and cannot do and outline the roles of each director and corporate officer.
Unlike articles of incorporation , corporate bylaws are private and do not get filed with any government entity. Even though they are private, bylaws are required by most states for your corporation to legally exist.
How Bylaws Work
Corporate bylaws are usually written by the owners of the company. After the bylaws have been prepared, they must be approved by the corporation’s board of directors . Once approved, the bylaws will become part of the corporate records and must be accessible to the IRS or any other entity that may audit your corporate records.
Even if a company chooses to not have detailed bylaws, at the very least, they need to include the corporations name and identifying information like address and place of business. The corporation should be designated as public or private, and lastly, the bylaws should include the fiscal year of the corporation.
Do Corporations Need Bylaws?
Corporate bylaws are mandated by some state’s business laws. If you live in a state that requires bylaws, then you must have them for your company to be legally recognized as a corporation.
If you are not sure if you state requires corporate bylaws, check out the list below to see which state’s business laws mandate bylaws.
Bylaws are Required in the Following States:
- District of Columbia (DC)
- New Hampshire
- New Jersey
- New Mexico
- New York
- North Carolina
- South Carolina
- South Dakota
- West Virginia
If you don’t see your state listed, your corporation is not legally required to have bylaws. However, it is recommended that every corporation adopt a rule structure or corporate bylaws to successfully run the company.
Here is an article that goes further into Bylaws.
Examples of Corporate Bylaws
Corporate bylaws are created by the owners and board of directors of a company so bylaws will vary based on an individual company’s size, structure, and management needs.
Although the bylaws may be different, the following list includes rules and topics that will most likely be covered in any company’s bylaws.
Statement of Purpose:
The statement of purpose describes what the business does. It should include:
- The reason you started the business
- The target customers
- What the business accomplishes for customers
- What makes your business stand out from the competition
- How you will reach your business goals.
If your business is a non-profit and you are looking to file for tax exempt status, the statement of purpose is especially important. This statement will help determine whether your company qualifies for tax exempt status with the federal government.
The member section of your bylaws will layout the rules for the types of members your company will have, voting rights of the members, and procedures for adding members. Other important membership information includes:
- The rights and responsibilities of members
- The voting rights of members
- How membership can be revoked
Not all corporations have members so this will not apply to all companies.
Board of Directors:
The board of directors of your corporation is a very important part of corporate governance . The board oversees the officers of the company and because they are usually not employees, only report to shareholders. For this reason, your corporation’s bylaws should detail the roles and requirements of the board. These rules can include:
- The number of directors
- How directors are elected
- Required qualifications
- Length of terms
- How directors can conduct meetings
- The number of directors required to constitute a quorum
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Corporations are required to hold corporate meetings, specifically, an annual shareholders meeting . In addition to the shareholders meeting, monthly or quarterly regular meetings can be held, and special meetings may also be called. The bylaws will dictate how these meetings are called and noticed, and layout the procedures that will be followed during the meeting.
Depending on state in which your company is incorporated, there may be specific requirements that you must follow for the corporate meetings. If you are unsure of your state business laws, you could consult with a corporate lawyer .
Some corporations opt to create committees within their board of directors. Committees will perform specialized tasks for the corporation. If you choose to have committees within your corporation, your bylaws should include the following:
- The kinds of committees your corporation will have
- Meeting information for the committees
- How the committees will operate
- What the committees are authorized to do within the company
Committees will generally utilize specific knowledge by board members to make recommendations as to how to solve problems within the company. Some examples of committees that a corporation may form include:
- Executive committee
- Finance committee
- Fundraising committee
- Audit committee
- Research committee
- Ethics committee
Issuing stock to shareholders should be one of the first orders of business for a newly incorporated company. The corporate bylaws will detail the number and type of stock classes that can be issued, who is entitled to receive stock, and how stocks will be transferred.
Officers are usually employees of the corporation, and they oversee the day-to-day operations of the company and report to the board of directors. Officers can sometimes be board members, but this needs to be specified in the bylaws. The bylaws will also dictate how officers are elected and appointed and what responsibilities they will have. Common officer tiles you will find in a corporation include:
- Vice President
Conflict of Interest:
It is common for bylaws to require directors to disclose any conflicts of interests they may have that could prevent them from acting in the best interest of the company.
Policies for Amendments:
This section will dictate how any bylaws can be changed or amended.
For more examples of laws and rules that appear in corporate bylaws, read this article.
Corporate Bylaws vs. Articles of Incorporation
Articles of Incorporation are a legal document that is filed with the state when a business becomes incorporated. This document allows a business to be recognized as a legally functioning corporation.
Included in the articles of incorporation will be basic information about the business like the name, place of business, when the business was formed, and sometimes, who will be included on the board of directors.
Corporate Bylaws are the guidelines by which the company will run. The biggest difference between articles of incorporation and bylaws is that bylaws do not have to be filed with any government agency.
Corporate bylaws are like the operating agreements for corporations.
How To Write Corporate Bylaws
Most corporate bylaws usually follow the same basic structure even though the specifics will vary for each company. Bylaws generally begin with the corporation’s general information including the name and location of the company and the names of officers and directors.
Bylaws will then describe the reason why the company was formed and the goals of the corporation.
The body of the corporate bylaws is filled by the various laws that the company will abide by. This usually begins by describing the leadership structure and the roles and responsibilities of each member of the corporation.
If you are unsure how to structure your corporate bylaws, you can easily find a template online. Each state has different laws regarding what needs to be included in bylaws, so it is always a good idea to consult with a corporate lawyer when drafting this important document.
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Meet some of our Corporate Bylaws Lawyers
Ryan A. Webber focuses his practice primarily on Estate Planning, Elder Law, and Life Care Planning. His clients range from young families concerned about protecting their family as well as aging individuals. Ryan provides Estate Planning, Trust Planning, Special Needs Planning, Public Benefit Planning, and Estate Administration. Ryan focuses on the holistic approach to the practice of elder law which seeks to ensure clients are receiving good care when needed and that they preserve enough assets with which to pay for such care. Many families and individuals also come to Ryan for preparation of their wills, power of attorney, and healthcare guidance documents. Additionally, Ryan assists small and medium sized business owners with their organizational and planning needs. From starting or winding down a business, Ryan provides quality business advice.
Small Business Attorney licensed in Texas and Colorado. Based in Dallas, appointments available in DFW area.
I am an attorney with six years of experience drafting and negotiating a wide variety of business contracts, in industries including technology and software, finance, professional services, hospitality, and non-profits.
I am a seasoned attorney with years of experience at leading startup and VC firm Gunderson Dettmer & international firm Cleary Gottlieb, and now serve as general counsel to a variety of dynamic businesses. Sample clients include Google, Samsung, the NHL, Morgan Stanley, Zocdoc, Grailed and Common Living. I most recently completed a longer term position with PricewaterhouseCoopers as Senior Manager, Technology, Product and IP Transactions. I have extensive experience advising clients on a wide variety of corporate matters and would be delighted to bring this experience to the table for you
Attorney Joshua K. S. Cali is a respected business, estate planning, and real estate attorney based in Ashland serving Middlesex County and other nearby areas. Joshua graduated summa cum laude from Bentley University in Waltham, MA, and from UCLA School of Law in Los Angeles. Before starting his own firm, Joshua practiced estate planning for high net worth clients at a boutique law firm in San Diego, CA.
A business-oriented, proactive, and problem-solving corporate lawyer with in-house counsel experience, ensuring the legality of commercial transactions and contracts. Michael is adept in reviewing, drafting, negotiating, and generally overseeing policies, procedures, handbooks, corporate documents, and more importantly, contracts. He has a proven track record of helping lead domestic and international companies by ensuring they are functioning in complete compliance with local and international rules and regulations.
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