Difference Between Articles and Bylaws
Articles are the formation docs you must file with the state to start a new business. Bylaws are a set of documents that outline how the company should be run.3 min read
The difference between articles and bylaws, simply put, is that Articles of Incorporation are the official formation documents you must file with the state to start a new business. Corporate bylaws, on the other hand, are a set of internal documents that outline how the company should be run.
Articles of Incorporation
Articles of Incorporation are the formal documents that must be filed with local state authorities to form certain business entities such as:
- Limited liability companies
- Nonprofit corporations
Depending on your specific state, Articles of Incorporation may also be referred to as:
- Articles of Organization
- Articles of Formation
- Certificate of Formation
In most cases, your articles will be filed with local state authorities, such as the Secretary of State or your state's equivalent. Once Articles of Incorporation have been filed with the state, they become public documents. Your Articles of Incorporation will define what your company intends to do and who is initially responsible for managing the business. These documents also include certain additional provisions that may be different from one state to another depending on local state corporation laws.
Articles of Incorporation should include the following information, at the very least:
- The name of the founding incorporator
- The name of the company
- The names of the company's initial directors
- The addresses for each of the company's initial directors
- Signatures of the company's directors and incorporators
In addition, your articles should include:
- The company's purpose
- The location of the principal office
- The name of the registered agent
- Types of available stock
- Amount of available stock
Once your company's Articles of Incorporation have been drafted and approved by the initial directors, they will be filed with the appropriate authorities in your state.
Your company's bylaws will serve as the organization's internal operations manual. In other words, bylaws are a set of rules that govern how a company is internally managed.
Corporate bylaws are especially important for non-profit corporations seeking tax-exempt status as a 501(c)(3) organization with the Internal Revenue Service. This is because the IRS will specifically ask for a copy of this document during the 501(c)(3) application process. Non-profit corporations are required to keep a copy at their principal business location. In addition, a copy of the nonprofit's bylaws must be signed by a corporate officer and submitted along with the corporation's application for tax-exempt status.
Regardless of whether your company is a nonprofit, bylaws are private, internal documents that are not filed with a government agency, except when filing for tax-exempt status with the IRS. Bylaws may be created either before or after a company files its Articles of Incorporation depending on such factors as:
- The state in which the company is located
- Incorporator preference
- Director preference
In most cases, corporate bylaws are usually created by the same person who is or will be filing the company's Articles of Incorporation. In some cases, the corporation may choose to put a board of directors in place before bylaws are created. This way, shareholders and directors are able to approve the bylaws before they are finalized. A company's bylaws should include:
- The name of the company
- The company's primary place of business
- Policies and procedures
- Operational standards
Bylaws should also include things such as:
- The number of officers and directors the company should have
- How to issue stock shares
- Meeting and record-keeping procedures
In addition, your bylaws need to include the requirements associated with making amendments to the bylaws as they currently exist as well as the company's Articles of Incorporation.
There's not much difference between the ways a nonprofit organization uses Articles of Incorporation and corporate bylaws and the ways for-profit organizations use the same documents. Just like any other corporation, nonprofit corporations gain a set of internal rules pertaining to things such as:
- Election of officers
- Tenure length
- Voting procedures
- Hiring policies and practices
The main difference is that nonprofit corporations need to include and adhere to certain specific provisions in their documents as a requirement for maintaining their tax-exempt status with the IRS. In addition to all the other requirements associated with Articles of Incorporation, a nonprofit corporation must also include a statement regarding the company's charitable purpose.
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