Sample Bylaws for S Corp: Everything You Need to Know
Sample bylaws for an S corp can be used to create corporation bylaws or company bylaws3 min read
Sample bylaws for an S corp can be used to create corporation bylaws or company bylaws. These are used by a corporation to organize management by providing rules and duties that apply to shareholders, directors, and officers.
Definition of Corporation Bylaws
Corporation bylaws keep a corporation running smoothly by providing internal regulations and instituting the rules and operation of the business. As a result of the corporation bylaws' requirements, LLCs have become small business owners' ideal choice of business type.
When incorporating a company as an S corporation, owners must complete and submit the following to the applicable state agency:
- Articles of Incorporation
- S corporation bylaws stating how the company will be operated
S corporations allow shareholders to report business income and losses on their individual tax returns. For this reason, many owners choose this form of entity for their business.
Importance of Bylaws
Small business owners, particularly those with few shareholders, are often doubtful of the necessity of providing bylaws. However, bylaws assist in establishing a company as a corporation; therefore, it is crucial that business owners treat the creation of bylaws seriously. A company's operation is directed through the institution of bylaws, and they can assist in guiding a corporation toward successful growth and bypassing future problems.
Besides these internal considerations, banks and other businesses may request a copy of a company's bylaws before considering doing business with that company.
Examples of S Corporation Bylaws
Here are some typical examples of S corporation bylaws:
- Yearly meetings will be held to elect a board of directors for the following year.
- To vote or carry on other transactional business, there must be a minimum of six directors.
- A president, chief financial officer, vice president, and chief executive officer will comprise the corporate officers.
- In the event that a corporate officer neglects their duties, shareholders can remove them by a majority vote.
What to Include in Bylaws
Bylaws should provide certain parameters for a corporation, such as the following:
There is other information that may be included in the bylaws:
- Location and regularity of board meetings
- Principles concerning the rights of the shareholders and the reports they receive
- Instructions regarding the removal and election of officers
- Guidelines concerning officer payment
- Conditions of stock offerings and certification
- Specifics regarding the editing and annulment of current bylaws and the adoption of new bylaws
Who Needs Corporate Bylaws?
Bylaws are needed by corporations to assist in forming their organization. The incorporators write the bylaws, and by doing so, they provide regulations for meetings, voting rights, and the assignment of each individual's control and duties.
Terms Used in Corporate Bylaws
Here are some typical terms that may be used:
- Special Meeting: an impromptu meeting for urgent decisions
- Quorum: the minimum number of shareholders that must be present in order to make decisions and conduct business
- Voting Trust: a shareholder designates a trustee to control his shares and vote based on the trust agreement
- Cumulative Voting: a voting system that allows each shareholder one vote per share multiplied by the number of directors being elected
- Remote Communication: meetings that take place using telecommunication
Decisions That Should Be Considered in Corporate Bylaws
Included in corporate bylaws are many decisions concerning the shareholders, directors, and officers. Information in a company's bylaws may contain the following:
- Notice requirement for calling special meetings
- Whether meetings may be held remotely
- The number of votes needed to create a quorum, whether shareholders can develop voting trusts, and whether cumulative voting is permitted
- Whether the company will use a simple or intricate management structure
- How many directors there will be
- Whether the company is allowed to loan money to its officers, directors, or employees
- The person in charge of appointing the officers
When Do Corporate Bylaws Become Effective?
The bylaws are typically accepted by the directors at their first meeting. The rules and guidelines provided in the bylaws will be in effect throughout the company's life or until a change is needed.
Can Corporate Bylaws Be Amended?
Since the needs of a business, corporate protocols, and laws can change over time, corporate bylaws may require occasional revisions. These can be made through a vote of the shareholders and directors.
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