What Are Bylaws for a Corporation?
A Basic Outline for Corporation Bylaws
When a corporation is formed, the first act of the board of directors must be to create the bylaws. The bylaws (sometimes spelled "by-laws") of a corporation are the governing rules by which the corporation operates. (The bylaws are one document, although it sounds like there are several).
Think of corporate bylaws as the overall guiding principles for operating the business. These principles direct the board of directors in their work to oversee the day-to-day operations of the corporation.
Bylaws vs. Articles of Incorporation
Before the new corporation exists, it must register with the state where it is doing business. The document that is registered is the Articles of Incorporation. This incorporating document contains a few pieces of basic information about the company as needed to be registered with the state. For example, Articles set the name and address of the company, a starting date, whether or not the company will be selling shares of stock, and possibly the names of members of the board of directors.
After the company is formed, its board of directors is established. The board decides on bylaws to help direct its operations over the life of the corporation. Your corporation's bylaws are all about your board of directors and how they must operate to run the company.
When you start your corporation, you will need to file the articles of incorporation with your state to establish the corporation's existence in that state. you don't need to file the bylaws (unless your corporation is applying for non-profit status), but they should be kept with other corporate records in case of an audit.
How to Create Bylaws
Corporate bylaws are written by the owners of the corporation at the time of its founding. Most businesses work with an attorney to write the bylaws.
Corporations are regulated by states, and your state may have specific procedures and regulations you must follow. Get the help of an attorney to make sure your bylaws are complete and correct.
What to Include in Your Corporate Bylaws
Bylaws discuss issues like corporate officers, board of directors responsibilities, how they are elected and their terms of office, how and when board and shareholder meetings will be held, and how the board of directors functions,
Here's a general outline of what you should include in your corporation's bylaws:
General Information about the Corporation
Shareholders and Meetings
- Information about stockholders and voting of shares of stock, the bylaws also show the number and type of shares and stock classes that the corporation is authorized to issue
- Information about shareholder meetings, including notification of a meeting and voting by proxy (voting by giving someone else authority to vote for a shareholder).
- Annual meeting procedures and requirements for notifying members. Every corporation must have at least an annual meeting, so this is an important part of the bylaws
The Board of Directors
- The number of board members, the general powers and duties of the board, term of service of board members, what number of directors is considered a quorum (the number that must vote for a resolution to be valid)
- Board meeting information, including frequency, location, and protocol
- Information about corporate board officers, including a description of their duties, how they are elected, and their terms of office
- Process for replacing a board member or corporate officer
- Procedure for removal of a board member.
Other General Provisions
- Procedure for corporate record-keeping, including rules for preparation and inspection of records and location of the corporate record book
- Procedure for amending articles of incorporation and bylaws
- Rules on approval of contracts, loans, checks, stock certificates, and other types of corporate resolutions (see below)
- Financial audits and inspection of the corporate records, mostly for public corporations, but really for all corporations
Board of Directors Approval of Bylaws
After you or another corporate director or a committee of your board of directors has prepared the corporate bylaws, they must be approved by the board. The bylaws are part of your corporate records and must be in a place where they can be viewed by the IRS or your state or other entity which might want to audit your records.
What Is a Corporate Resolution?
One of the most important duties of a board, as described in the bylaws, is to enact resolutions. These resolutions are decisions made by the board. They must be in a specific format and must be recorded in board meeting minutes.
Do Partnerships and LLCs Have Bylaws?
Every business needs rules and guidelines to operate. Partnerships and LLCs have similar types of rules. For a partnership, this set of rules is a partnership agreement; for an LLC the rules are an operating agreement. The contents are similar to bylaws.
This article is intended to be general information about corporate bylaws, not tax or legal advice.
The bylaws of a corporation are a legal document. If you are still thinking maybe you could write the bylaws yourself or get a free bylaws form online, read this article about the dangers of using free legal forms.
Legal Information Institute. "Bylaws." Accessed Dec. 3, 2019.
Score.org. "Define Your Structure: Corporate Bylaws." Accessed Dec. 3, 2019.
Digital Media Law Project Legal Guide. "Corporate Bylaws." Accessed Dec. 3, 2019.
The University of Texas at San Antonio. "Example of bylaws for Texas Corporation." Accessed Dec. 3, 2019.