Bylaws vs Articles of Incorporation: Key Legal Differences

Key Takeaways

• Articles of Incorporation establish the legal existence of a corporation and are filed with the state.
• Bylaws define how the corporation is internally governed and are not usually filed with the state.
• Articles are public documents; bylaws are internal but may be shared with third parties like investors.
• Articles can only be amended with shareholder approval, while bylaws can usually be changed by the board.
• Both documents are essential for regulatory compliance, governance clarity, and legal legitimacy.

Understanding bylaws vs. Articles of Incorporation is important since both are essential documents in forming a corporation. Articles are the charter that creates a corporation, whereas bylaws set out the rules and procedures for internal governance of the corporation.

What Are Corporate Bylaws?

Bylaws are the set of rules and procedures for the internal functioning of an organization. They are like an operating manual that governs the day-to-day working of a company.

You can create the bylaws either before or after incorporating your business (i.e., filing of Articles of Incorporation). Usually, the incorporator (the person who files the Articles of Incorporation) creates the bylaws. Some companies may hold a board meeting for approving the proposed bylaws.

The bylaws generally include:

• The name of the company.
• The main place of business.
• Policies and procedures for holding meetings, issuing shares, and conducting the business.
• Requirements and procedures for making any future changes in the bylaws and the Articles of Incorporation.

All nonprofit corporations seeking an exemption from federal income tax must have the bylaws since you'll be required to file a copy of the bylaws along with your application to the IRS.

Why Bylaws Matter for Corporate Governance

Corporate bylaws play a central role in shaping how a corporation operates on a daily basis. Beyond defining meeting procedures and officer roles, bylaws ensure accountability, promote transparency, and prevent internal disputes. They serve as a guiding document for resolving operational questions and clarifying responsibilities within the organization. In some jurisdictions, failure to maintain bylaws can undermine the corporation’s limited liability status or create difficulties in securing funding, as potential investors often review them to assess risk and governance structure.

What Are Articles of Incorporation?

Articles of Incorporation are the legal document that creates your corporation. They are also known as Articles of Association, Articles of Formation, or Certificate of Formation in some states.

Articles of Incorporation usually include:

• Name of the founder or incorporator.
• Name of the corporation.
• Principal place of business.
• The purpose of forming the corporation.
• Names and addresses of the founding directors.
• Name and address of the registered agent.
• Authorized capital of the corporation.
• Signatures of the founders and directors.

The founder or the person applying for incorporation prepares and files the Articles of Incorporation with the approval of the initial directors of the company.

Purpose and Legal Significance of Articles of Incorporation

The Articles of Incorporation legally establish a business as a corporation within a specific state. Filing this document provides recognition by the state and grants the business legal rights, such as the ability to enter into contracts, sue or be sued, and issue stock. For-profit and nonprofit corporations alike must file this charter to gain legal standing. Moreover, Articles of Incorporation may be required to open a corporate bank account, apply for business licenses, or register for tax IDs at the federal and state levels.

Differences Between Bylaws and Articles of Incorporation

• The Articles of Incorporation are like the constitution of the corporation that provides a broad framework for its establishment, whereas the bylaws can be likened to the individual laws that must be consistent with the Articles of Incorporation.
• The Articles of Incorporation include general details about the corporation; the state usually stipulates the particulars you must include in the articles. The bylaws, on the other hand, spell out the detailed rules and procedures for managing the corporation.
• You must file the Articles of Incorporation with the state (usually with the Secretary of State) where you are incorporating the business. However, in most of the states, you need not file the bylaws; they are meant for the internal governance of your organization.
• You must pay a filing fee for submitting the Articles of Incorporation with the state agency. The amount of the fee varies from state to state. No such fee is required in the case of bylaws since you need not file them.
• Just like Articles of Incorporation, the bylaws are admissible in the courts of law; they are helpful in proving that the governance of the company was carried out in accordance with the pre-approved rules and procedures set out in the bylaws.
• Once your Articles of Incorporation are approved by the state agency, they become a public document. The approving agency usually returns the articles and issues a Certificate of Incorporation. The bylaws, however, are not freely accessible to the public; they are kept with the company records. However, you may have to share the bylaws with a third party — for example, with your investors who may insist on having a copy of the bylaws before investing in your company.
• For the sake of simplicity, provisions covered in the Articles of Incorporation should not be repeated in the bylaws. If you do, you'll have to amend the articles whenever you modify the repeated provisions in the bylaws.
• Since the Articles of Incorporation are the charter of your company, you can amend them only in accordance with the relevant provisions of your state. For instance, some states may require you to hold a meeting of your shareholders to carry out any changes in the articles. On the other hand, directors have more freedom in amending the corporate bylaws, which can usually be done without holding a shareholders meeting. Generally, the bylaws themselves contain the procedure for making amendments.

Despite their similarities and differences, the articles and bylaws both are essential documents in establishing the legal structure of a company.

Bylaws vs Articles of Incorporation: Comparison Table

To better understand the distinctions, consider the following side-by-side comparison:

This table illustrates how each document serves a different but complementary role in a corporation’s lifecycle.

Common Mistakes to Avoid

When dealing with bylaws vs articles of incorporation, avoid these common pitfalls:

• Duplicating content across both documents: This creates inconsistencies that require updating multiple documents for a single change.
• Failing to adopt bylaws: Even if not required by law, not having bylaws can cause governance issues or problems when seeking funding.
• Not updating after changes: If your corporation changes its structure or leadership, both articles and bylaws should be reviewed and updated accordingly.
• Relying solely on templates: Generic documents may miss important provisions tailored to your business's unique needs. Consulting a qualified attorney helps ensure compliance and clarity.

Frequently Asked Questions

1. Are corporate bylaws legally required?
   Most states don’t require you to file bylaws, but they are strongly recommended and may be required for tasks like opening a bank account or applying for tax-exempt status.
2. Can you change bylaws without amending the Articles of Incorporation?
   Yes. Bylaws can typically be amended by the board of directors without needing to file anything with the state, unlike the articles.
3. What happens if I don't file Articles of Incorporation?
   Without filing Articles of Incorporation, your business won’t legally exist as a corporation and won’t receive limited liability protection.
4. Do I need an attorney to draft bylaws or articles?
   While not mandatory, legal guidance is highly recommended to ensure compliance and avoid future disputes or regulatory issues.
5. How do bylaws affect board meetings and voting procedures?
   Bylaws outline how and when meetings are held, quorum requirements, and how votes are conducted, providing consistency and structure to decision-making.

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