Corporation bylaws are the rules and responsibilities shareholders, directors, and officers follow. If you are reading a sample S corporation bylaws, they may be referred to as corporate bylaws, bylaws, and company bylaws.

An Introduction To Corporation Bylaws

LLCs became a popular business entity for small business owners because of the corporation bylaw requirement.

Created internally, corporate bylaws make sure the running of the corporation continues smoothly. Because corporation bylaws are rules and responsibilities created internally, they're written down for company records but there's no need to file them as operating agreements with the Secretary of State.

Importance Of Corporation Bylaws

For small businesses with few shareholders, some business owners wonder why creating bylaws is necessary. They're a necessary step in forming a business with any structure; therefore, it is best to complete them early to avoid any future conflicts. When corporation bylaws have been established, they make sure there's a method of governance for the company.

Although the Secretary of State doesn't require a copy, banks and other institutions may ask for a copy before signing agreements.

Not all businesses remain small. Corporation bylaws help map out the success of a business with potential exponential growth.

What To Include In Bylaws

Corporation bylaws start simple, with basic corporation information including:

  • The names of officers and directors leading the company
  • Guidelines for committee formation and the process for election of directors and board members
  • The location and frequency of board meetings
  • How and when shareholders will be reported to, as well as their rights
  • The compensation for officers
  • The process for electing and removing officers
  • The terms of stock offerings and whether they'll be certified or not
  • How existing bylaws can be edited, removed, or new bylaws added

How and When Are Corporation Bylaws Written?

The company incorporators are usually the ones who document the corporation bylaws in the process of becoming a formal entity. From the outset, they establish a company culture based on the rules, voting rights, and the power of individuals. Alternatively, the Board of Directors can create corporation bylaws as one of their first actions.

Not all states require corporation bylaws to be written formally, but it is usually a good idea anyway. The corporate bylaws are usually implemented from the beginning of the first directors' meeting.

Which Decisions Should Be Considered In Corporate Bylaws?

The following are found in the majority of corporation bylaw documentation:

Quorum: As each shareholder owns a different number of shares, the quorum is the fewest number of shares that must be present at any meeting in which decisions can be made.

Voting Trusts: Not all voting shareholders need to vote. They can appoint a trustee to hold and vote for them based on the trust agreement.

Cumulative Voting: A specific voting method. Each shareholder gets one vote per share multiplied by the number of directors the shareholders are electing.

Notice for Special Meetings: The minimum amount of notice required for a special meeting to be called.

Remote Meetings: Clarifying whether or not meetings can be held remotely.

Company Management Structure: You can choose a simple or complex management structure (there's no right or wrong structure).

Lending: Determining whether officers, directors, or employees can borrow money from the corporation.

Sample Of Corporation S Bylaws

These are samples of S corporation bylaws you might find:

  1. Principal Executive or Business Offices. The board of directors will determine the fixed location of the principal executive office either inside or outside of a particular state. For example, if the principal executive office is located outside California and there are multiple business offices in California, the board will list a principal business California office.
  2. Directors. At each annual shareholder meeting, directors will be elected for office until the next annual meeting is held. Each director, including those filling vacancies, are to hold office for the elected term until a successor has been elected and qualified. No reduction in qualified directors is reason enough to remove another director before their term expires.
  3. Board of Director meetings may be held without call as determined by the board. No minimum notice needs to be given to shareholders.

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