With a corporate bylaws template, you can draft the guidelines necessary to start your own corporation. Having proper bylaws for your company helps ensure that there are no legal or financial complications later on.
What are Corporate Bylaws?
Corporate bylaws, also called company bylaws or just bylaws, are a set of instructions for how a corporation is run. Written by a company’s board of directors as one of its first duties, bylaws outline the operational procedures of those directly involved with the corporation.
While corporate bylaws may differ based on the size and type of the corporation, they generally cover the same points, including:
- The structure and basic information of the corporation
- A list of committees
- Details on the makeup and appointment of the board of directors
- The roles and responsibilities assigned to officers
- Information on shareholders and stock options
- How shareholder and board meetings are run
Bylaws don’t need to be registered in most states, but they need to be kept on company grounds in the event of an investigation or audit. In general, most corporations will have both documents.
What is the Difference Between Articles of Incorporation and Corporate Bylaws?
The difference between articles of incorporation and corporate bylaws is that while articles of incorporation are filed with the Secretary of State in order for a business to be registered as a corporation, corporate bylaws are a set of internal instructions for how a corporation is run that are kept on file with the corporation.
A business’s articles of incorporation are public record which means anyone can look up that information, while corporate bylaws simply explain how the business is run and aren’t necessarily available to the public.
When Should I Use a Corporate Bylaws Template?
You should use a corporate bylaws template if you plan on incorporating your business. Most states require that corporations have bylaws, but there are usually no set criteria or legal requirements for their content. However, bylaws do have to address incorporation standards mandated by the state, such as the number of the corporation’s board directors or how bylaws can be amended.
For example, California has no strict specifications for what has to be written in corporate bylaws. However, a company incorporated in California with more than three shareholders is required to have at least three directors on its board, which must be noted in the company bylaws.
Not every state requires corporate bylaws, but it’s recommended you have one prepared in case business interests, financial institutions, or legal authorities want to look into your company’s operations.
A company incorporated as a C corporation, or C corp, is taxed separately from its shareholders, but also retains its profits and losses independently. The IRS considers the C corp as the default standard for corporations. However, other types of business entities also have to produce their own bylaws.
While S corporations, or S corps, are different business entities than C corporations, they are subject to the same corporate bylaw requirements. Company bylaws for both types of corporations are state-mandated management guidelines that are written to protect the shareholders and the board of directors from liabilities.
Limited Liability Company (LLC)
LLCs don’t need to draw up corporate bylaws, but some states require an alternative called an LLC operating agreement. Much like bylaws, the document outlines how the LLC is organized and operated, along with the member responsibilities. Despite the difference in name, LLC operating agreements are legally binding documents that protect business owners and interests.
How to Use a Corporate Bylaws Template
A properly written corporate bylaws template will address main points common to most corporations, but they do involve more technical terms that are usually included.
Make sure that the following terms are properly covered in your template:
1. Incorporated State and Name
One of the first tasks in incorporating a company is to decide on an available name. Many state business filing websites include a free search function where you can check if your desired business name is already taken. As corporations have to abide by the laws of the state where they’re incorporated, the location of your corporation is important as well.
2. Shareholders, Annual Meeting, and Quorum
Shareholders are essentially the owners of a corporation, so the details of the annual meeting should be included to facilitate the voting process. In addition to a list of stockholders, the bylaws should also outline their voting rights and the quorum (minimum number of members present) necessary to vote on matters.
3. Board of Directors and Committees
The board of directors is responsible for writing the corporate bylaws, and must also lay out the appointment process for its members, including:
- The extent of their powers
- The term length of their held positions
- Details regarding the directors’ meeting, the voting process, and quorum
- How to proceed with resignations, removals, or vacancies of directors
Part of the board’s powers is also to make committees composed of its own members in order to delegate responsibilities. The operating details of these committees should be noted.
4. Stocks and Dividends
The class of stock and share type should be made clear, as they represent voting rights and ownership of the corporation. It’s also best practice to denote how the company will handle and pay out dividends to its shareholders.
Corporate bylaws can be amended based on the growth of the company, but the process for doing so might be different between corporations. In most cases, amending the bylaws should only require a majority vote by the board of directors, the shareholders, or both. Unlike articles of incorporation, state laws are generally flexible about bylaw amendments.
Sample Corporate Bylaws Template
Use a corporate bylaws template to make sure that your corporation has the proper guidelines it needs to avoid future complications.
Can Corporate Bylaws be Amended?
Yes, corporate bylaws can be amended, but there are some rules you have to follow when amendments take place. It’s important to update your corporation’s bylaws when the business needs to change, to amend your corporate bylaws you will need to:
- Call a meeting – You can discuss changing corporate bylaws in any meeting, but in most cases, a special meeting notice will be required (this will be outlined in your bylaws).
- Share a copy of the proposed amendments – your corporate minutes should include a copy of the amendments and you should share a copy with all board members.
- Vote – depending on what your corporate bylaws outline, all shareholders and board members will need to vote on the proposed amendments at a meeting—ensure a quorum is present if required.
- Provide a written resolution – If the amendments are accepted and the vote is in favor, you need to provide a written resolution detailing the changes.
- Amend the corporate bylaws – Finally, amend your current bylaws with the new changes. To amend your bylaws you can use the company amendment pages, or add them to the official bylaws. You may need to send a copy of the updated articles to the Secretary of State.