Corporate bylaws are the guidelines that regulate a business’s internal management and operations. This document creates clarity for a business to minimize disputes and promote productivity within an organization.
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What Are Corporate Bylaws?
Corporate bylaws are instructions for how a corporation will conduct itself. A company’s board of directors writes this document in the organization’s initial phases. It outlines the operational procedures of individuals with direct involvement with the corporation.
Corporate bylaws establish the internal rules and regulations governing a corporation’s daily business. They guide the board’s actions and decisions and help prevent and resolve conflicts. In short, corporate bylaws establish the company’s management structure and its procedures.
Overview of Bylaws
- Are corporate bylaws legally binding?: Yes
- Are corporate bylaws need to be notarized?: No
- When do corporate bylaws come into effect?: Once the corporation’s board approves of them.
What to Include in Corporate Bylaws
While each organization will have a different governing structure, the elements within corporate bylaws are usually consistent across different companies:
- Company management structure: Bylaws explain the company’s management structure. It can be simple with just a president, secretary, and treasurer. Larger businesses may establish a more complex structure with a president, vice president, chief financial officer (CFO), chief executive officer (CEO), and COO.
- Voting: Bylaws contain voting procedures and guidelines. For example, it can specify if cumulative voting is permitted and if shareholders can create voting trusts.
- Notice for special meetings: Special meetings may be necessary for tasks like amending bylaws or appointing new directors. In your bylaws, you can specify if a company needs to give a certain amount of notice to conduct a special meeting.
- Remote meetings: Whether a company needs to conduct an annual or special meeting, a remote meeting may be easier for more directors to attend. A company can clarify whether it allows for remote meetings.
Do States Require Corporate Bylaws?
The requirement for corporate bylaws varies from state to state. The majority of states require you to have corporate bylaws. Even if your company operates in a state without this requirement, you can still benefit from having them.
Below, you can see what states require corporate bylaws and which ones don’t:
Even in states that require bylaws, you don’t have to register them with the state. You only have to keep them on file within the organization.
How to Write Corporate Bylaws
Step 1 – Define the Corporate Authority
Begin by defining the corporate authority. Include the name of your organization and the date when you filed the articles of incorporation. List the state where the company has authorization to conduct business.
Specify what state law the corporation is under and briefly describe the corporation’s purpose.
Step 2 – Outline Offices and Records
Outline information related to office and records, including the state of the registered office/registered agent, the location of other offices, and guidelines for the company’s books and accounts.
Step 3 – Explain the Conditions for Stockholder Meetings
State where stockholder meetings will take place. Provide provisions for annual and special meetings. For example, directors may only have permission to cover pre-approved topics during an annual meeting. You can also explain the notice necessary for meetings, the quorum, voting rights, and a list of stockholders who can vote in the meeting.
Step 4 – Provide Director Information
Explain the powers the directors will have within the organization. You can also outline the following director-related information:
- The number of directors and their term of office
- Vacancies
- Resignation
- Removal
- Fees and compensation
- Organization (who will preside over a meeting)
Step 5 – Include Officer Information
Include the tenure and expected duties of officers. Depending on your organization, these officers may include the treasurer, secretary, and president.
Step 6 – Write Stock Guidelines
Write stock guidelines for the issuance and transfer of stocks. You can also outline the procedures for unforeseen circumstances, like lost stock certificates.
Step 7 – Decide on Dividend Regulations
Decide on how the company will declare and pay out dividends. You can also explain the company’s dividend reserve and its associated procedures.
Step 8 – Define the Fiscal Year
Define what the corporation will use as its fiscal year. Some companies use the calendar year, while others use another 12-month period.
Step 9 – Outline Indemnification and Insurance Information
Outline if the corporation will have the power to indemnify its employees, officers, directors, and other agents. Also, specify if the corporation can buy and maintain insurance on behalf of one of these parties.
Step 10 – Provide Guidance for Notices
Provide guidance for notices when state/federal law, the bylaws, or the articles of incorporation require them.
Step 11 – State If Amendments Are Allowed
State if the corporation permits amendments to its bylaws.
Step 12 – Include Miscellaneous Details
Include miscellaneous details, including those relating to the company’s annual report, alternative forums, and interpretation.
How to Amend the Corporate Bylaws
If you ever want to make changes to your corporate bylaws, you can follow these steps:
Step 1 – Call a special meeting according to the guidelines in your existing bylaws.
Step 2 – Share a copy of the proposed amendments via your corporate minutes document for that meeting. Share a copy with all board members.
Step 3 – Hold a vote. Depending on your corporate bylaws, all shareholders and board members may need to vote on the proposed amendments. Determine if you need a certain number of directors present.
Step 4 – Provide a written resolution to detail the changes if the group accepts the amendments.
Step 5 – Finalize the amendments, ensuring they accurately reflect the company vote.
Corporate Bylaws Sample
Download a corporate bylaws template as a PDF or Word file to set up your corporation’s rules for governance.
Frequently Asked Questions
What is a quorum?
A quorum is the minimum number of shareholders or directors that must be present (in person or sometimes virtually) at a shareholder or board meeting for the members to conduct it legally and make business decisions.
What is the difference between articles of incorporation and corporate bylaws?
The difference between articles of incorporation and corporate bylaws is that while articles of incorporation are filed with the Secretary of State, corporate bylaws are a set of internal instructions for how a corporation is run that are kept on file with the corporation.
Who can amend corporate bylaws?
A company’s shareholders can amend its bylaws. However, the board of directors may further amend or repeal the changes.
Are corporate bylaws public record?
No. A business stores its bylaws internally.
How can one get a copy of a company’s bylaws?
Because bylaws are an internal document, you can get a copy of them as a shareholder. Contact the individual in charge of your company’s shareholder services to request a copy.