Sample Bylaws Corporation: Everything You Need to Know
Sample bylaws for a corporation can give you an idea of how your company's bylaws should read and what to include in them.3 min read
2. Bylaws vs. Articles of Incorporation
3. What You'll Find in Bylaws
Sample bylaws for a corporation can give you an idea of how your company's bylaws should read and what to include in them. This document specifies how your corporation is governed, and it should be customized for your business.
The Importance of Bylaws
Consider bylaws to be the most important legal document of your corporation. Bylaws should easily show how your corporation is organized. They should detail everything from your business structure to the expected duties of your board of directors.
Incorporating your business involves filing the necessary documents with the appropriate state agency. This includes submitting an articles of incorporation, along with drafting your company's bylaws.
Many small business owners prefer S Corporations due to their tax benefits. Small business owners may question why they need bylaws for their small corporation, especially if they don't have multiple shareholders. Bylaws are still important, no matter the size of the business, because they help establish the business entity as a legitimate corporation.
Bylaws do the following for a corporation's members:
- Protect their rights
- Outline specific responsibilities and duties
Bylaws help determine procedures regarding nominations and elections. They also help settle disputes.
Some financial institutions and banks require corporations to present a copy of their bylaws before doing business with them. Even if your company is small right now, there's always a chance it will grow larger. Having bylaws in place can provide a roadmap for your expansion.
Bylaws vs. Articles of Incorporation
Some people confuse bylaws with Articles of Incorporation.
Articles of Incorporation give a basic outline of a company. Bylaws, however, cover specific topics such as the following:
- How to elect officers or directors
- How to conduct meetings
- Officer duties
Articles provide general information regarding the formation of the company, such as the following:
- Incorporators' names
- Number of shares to issue
- Names of directors
- Business name and address
Articles of Incorporation, like bylaws, differ from one company to the next; they're not detailed documents about the business's management or operations. You must file your Articles with the state. If you have to amend them, it costs a fee. You can change your bylaws free of charge with a vote by the board.
Not every state requires bylaws, but it's always a good idea to create them for your own records.
What You'll Find in Bylaws
Following is the type of information commonly found in bylaws, broken down by section.
- Corporation name
- Purpose of your business
- Physical location of your business
This details different aspects of membership, such as the following:
- How to select members
- Types of members
- Members' voting rights
- How to discipline or remove members
Board of Directors
In this section, you should outline the following:
- How many directors are allowed, including a minimum or maximum
- How to fill board vacancies
- Required qualifications to serve on the board
- Director duties and length of term
Include special committees here, and cover information regarding the following:
- How committees are formed
- Specific duties of a committee
- Roles and duties of the "Executive Committee"
Common committees you'll find in corporations include the following:
- Membership Committee
- Audit Committee
- Nominating Committee
Officers include a Treasurer, Secretary, President, and Vice President. They have specific functions.
Detail the following in this section:
- Officer selection process
- Specific responsibilities and powers of each officer
In your bylaws, you should cover procedures for filling vacancies and removing officers. A Nominating Committee may be included here, as its role is to recommend officer nominations to the board. Here, you'll specify how long officers serve and/or compensation details.
Conflicts of Interest
Be sure to include a provision for conflicts of interest in your bylaws. For instance, an officer shouldn't vote on a resolution in which he or she has a direct financial interest. If the IRS finds that your corporation provides unfair benefits to members of the company, this provision can give you some protection from IRS penalties.
Because bylaws are such an important document for your corporation, you might want to consult with legal professionals to ensure yours is properly drafted. It needs to be a very detailed outline of how your corporation is run, and all eventualities should be covered. This gives your corporation added protection in case it ever faces any adverse actions.
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