Corporate Bylaws

What are corporate bylaws?

Corporate bylaws are a document that is used once a company has been incorporated. They are used to define the structure and operations of the organization. Bylaws are essentially the rules for how the organization will be governed and describe many of the company's activities, such as annual meetings, the composition of the Board of Directors, and voting procedures. Most states require the creation of Bylaws at the same time, or not long after, the incorporation of an organization.

What is the difference between non-profit bylaws and corporate bylaws?

Though both documents are used for newly incorporated organizations, they are used by different types of organizations. Non-profit bylaws may only be used by non-profit organizations. As a result, they do not contain any information about profits or shareholders. Corporate bylaws are used by for-profit organizations, like LLCs or S-Corps. They address division of profits and the rights of shareholders.

What is the difference between corporate bylaws and a shareholder agreement?

Though both documents are used by corporations, they are very distinct legal documents and serve different purposes. Corporate bylaws establish internal rules for the corporation and how it will be managed and operated. The bylaws primarily apply to the board of directors and officers of the corporation. They are also legally required. A shareholder agreement is used to govern the relationship between parties who own shares in a corporation. The agreement only addresses issues related to ownership, rather than how the corporation itself will run. It is an optional document and applies only to shareholders.

Is it mandatory to have a corporate bylaws document?

Yes, it is mandatory to have corporate bylaws. Almost all U.S. states require that non-profit organizations create and adopt bylaws as they are being incorporated.

What is a "board of directors"?

A board of directors is a group of people who are elected or appointed to supervise the strategic direction of a company. The people selected as directors come from the overall membership of the organization.

What is "quorum"?

Quorum is a term for the percentage of board members who must be present at a meeting in order for the organization to conduct business. This is to ensure that important decisions are not made while very few members of the board are present.

What are "officers"?

Officers are individuals are selected to manage aspects of the day-to-day operations of the organization. Common officer positions include the secretary, treasurer, and president.

What are "shareholders"?

Shareholders are owners of shares in a corporation. Shareholders generally have a right to vote on major corporate decisions and also receive a share in the profits of the organization.

What must corporate bylaws contain?

Valid corporate bylaws must contain at least the following mandatory clauses:

• Identifying information: The corporate bylaws describe the organization, including its name, state in which it was incorporated, and the specific purpose of the corporation.
• Meetings: The corporate bylaws outline when, where, and how the organization will hold meetings, including a definition of what constitutes a quorum and how much notice must be provided before a meeting is held.
• Directors: The corporate bylaws describe the directors of the organization, including how many there are, how long a term is, whether they are compensated for their work, and how they can be removed from the organization.
• Officers: The corporate bylaws specify information about the organization's officers, including their roles, responsibilities, and any compensation.
  
  

What are the prerequisites for corporate bylaws?

Corporate bylaws should be created in tandem with or not long after the organization creates their articles of incorporation. The articles of incorporation are usually filed with the state before the bylaws are finalized, since the corporation must exist as a legal entity before it can adopt and operate under bylaws.

Who is involved in corporate bylaws?

Corporate bylaws involve a for-profit organization and its directors, officers, and other members.

What should be done once the corporate bylaws are written?

Once this document has been completed and reviewed, it should be printed out, certified, and signed. Generally, if a president or secretary of the organization has already been determined, those individuals are responsible for certifying and signing all corporate documents, including the bylaws. However, if those roles have not yet been filled, a third party known as an incorporator may sign this document in their absence. The bylaws are then brought to a meeting of the board of directors, where they are officially adopted by the board.

This is only one step in the creation of a corporation. In addition to writing and adopting corporate bylaws, the organization should also register with the Secretary of State. There are usually filing fees associated with this process. The organization should also ensure compliance with any additional state-specific requirements for corporations, such as obtaining required business permits and insurance.

Which laws are applicable to corporate bylaws?

Corporation creation and structure is generally a matter of both state and federal law. Most states require the creation and filing of bylaws at the same time as or not long after the creation of the articles of incorporation. Many states have adopted the Model Business Corporation Act, which dictates procedures and requirements for creating a new business organization in a state.

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