Do Bylaws Supersede Articles of Incorporation
The answer is no. Articles of incorporation, also called the charter in some states, are part of the organizing documents to create your company.3 min read
Do bylaws supersede articles of incorporation? The answer is no. Articles of incorporation, also called the charter in some states, are part of the organizing documents to create your company. The bylaws are related to the day-to-day operation of the business; they are the "meat and potatoes" of your company.
The Difference Between Bylaws and Articles of Incorporation
An easy way to remember the differences between the two is to think of a corporation as a piece of art in a frame. The frame is the articles, and the bylaws are the picture. Another good analogy is to think of the business as a building. The articles are the concrete foundation, whereas the bylaws are the structure that sits in the concrete.
- Bylaws are private documents for internal use by an organization. They are not filed with any governmental entity. The bylaws describe the daily operations.
- Articles of incorporation are public documents filed with the state agency that governs the establishment of corporations, usually the Secretary of State. The articles create the frame of the company.
- A major difference between bylaws and articles is the process for changing them. To amend the company's articles, you'll need to research and comply with your state's statutes. In some jurisdictions, you must have a shareholder meeting to change your articles. Bylaws are much more easily modified without a formal shareholder vote. The process for changing the bylaws should be spelled out in the bylaws themselves.
- Bylaws govern the day to day operations of the business and are usually more complex than articles.
- When your corporation is formed, you file the articles of incorporation with the appropriate agency within your state. They become part of the public record. Fees are required, and they vary by state. The fees may be less for a nonprofit organization.
- Bylaws are not open to the public unless the company chooses to share them. Potential investors may want to see the bylaws before they turn over any money.
What Should be Included in Bylaws?
State law grants companies more flexibility to write bylaws than is usually granted in writing articles. For example, Delaware allows you to write whatever rules you wish as long as they don't conflict with the law or the articles for that company.
Your bylaws should also include the following details:
- How are your directors chosen?
- What is the process for removing a director?
- How are board and stockholder meetings carried out?
- What are the responsibilities of corporate officers, such as the CEO?
- How are your officers and directors compensated?
- How are decisions made between meetings?
Bylaws can be as intricate or as vague as you need them to be. It's a good practice to not duplicate anything in the bylaws that also appear in the articles of incorporation. By following this suggestion, you won't have to update the articles when you change the bylaws.
What Should be Included in the Articles of Incorporation?
While requirements vary by state, a few components are common:
- Company name and principal address.
- A general corporate purpose, which can be as simple as "to engage in any lawful activity," gives you flexibility.
- The name and address of the registered agent who can accept legal service for the business.
- The number, classes, and the initial value of shares of stock.
- The names and addresses of the initial directors may or may not be included.
- How assets will be distributed in the event of dissolution.
- Whether the organization's members will vote.
- Limited liability for directors (check for state-specific requirements; see Colorado's statutes for example).
- If the company is a 501(c)(3) organization, federal tax laws require specific language related to the organization's purpose and plan for dissolution.
Limitations on Bylaws
Bylaws are the guidebook for how your company operates. However, they don't trump everything. The bylaws do take precedence over parliamentary procedures and any other internal rules you may adopt. But bylaws don't overrule the law, the articles, or other documents related to the company's formation. They can't require your company to behave illegally or in a manner contrary to the organizing documents.
Some Specific Information for Nonprofit Corporations
In a nonprofit corporation, the articles and bylaws are critically important.
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