If you are in the process of starting a corporation, you probably know that the first step is to prepare a document called the “articles of incorporation.” What some people don’t realize is that this isn’t exactly the same thing as your corporation’s bylaws.
The articles of incorporation you file establish your corporation’s existence in public records, but your bylaws will run the company’s internal operations.
Most states in the U.S. require corporations to have bylaws, but even if they’re not required, they’re good to have.
At Generations Law Group, we have decades of experience helping businesses in Idaho and throughout the U.S. with every step of building a business — including creating its bylaws. Read on to learn more from our attorneys about why bylaws are so helpful.
What Are Corporate Bylaws?
Corporate bylaws are documents that contain rules and regulations guiding the board of directors once a business incorporates.
These documents lay out the entire process of the corporation’s operations, from its day-to-day operations to its procedures for incorporation. Setting up bylaws is very important as it serves as the roadmap for the business operation.
What a Standard Set of Corporate Bylaws Should Contain
Each business is different, of course, and will have different necessities and needs. However, there are some basics that a standard set of corporate bylaws should have.
- The name of the business
- Intended business legal structure
- Roles and responsibilities of each member of the corporation.
- The stock sharing formula and how shares can be sold or transferred.
- The organization of the board of directors will include how board members are elected and their tenure.
- Power-sharing formula
- Who is responsible for decision making
- Corporate record-keeping procedures
- Explicitly state the corporation’s fiscal year and accounting method.
- Contains the overall details about the corporate financial audits; this is specific for publicly traded corporations.
- It should also state details about the annual meeting, such as committees, shareholders, and directors.
- It should also state how regularly these meetings will take place and the mediums used to notify members.
- The process that will be adopted to handle conflict of interest.
- Provisions for amending the corporate bylaws
Why Corporate Bylaws Are Important
Since the bylaws contain the rules for business operations and stipulate the roles and responsibilities of everyone involved, having them drafted will mean a smooth day-to-day running of the business.
Bylaws are dynamic, so you can improve the bylaws to adapt to the changes as the business grows. And since they serve as a guide, they will help you navigate unprecedented challenges or conflicts.
For example, the bylaws tell all parties what will happen if one business partner chooses to leave the company, therefore solving disagreements among the board. They can also stipulate the procedures in case a member dies, etc.
These bylaws come in handy particularly with legal and financial questions. For example, if you want to open a business bank account, you may be required to provide corporate bylaws. Must banks also request it when applicants apply for a loan. Other uses include obtaining government certification and company retirement plans.
Another essential role the corporate bylaws play is creating a clear-cut distinction between personal and business commitments. For instance, if you get sued, the bylaws should prove that your personal assets are completely different from the business’ assets; this way, even if the verdict doesn’t go in your favor, it won’t affect your business, or vice versa.
Contact an Idaho Business Attorney Today
Businesses can be complicated to run, and it’s important to make sure you’re checking off all the necessary boxes for yours. If you need help with your corporate bylaws, or any other questions regarding your company or corporation. Generations Law Group is here to help.
We’ve been helping businesses throughout Idaho and the rest of the U.S. for decades. Contact us today to schedule your first consultation.