5 Things to Know About Corporate By-Laws

Every corporation requires by-laws.  They are a necessary document for every corporate entity.  

The problem is that most people who form corporations aren’t quite certain what by-laws actually are, nor what they do.

Below are five (5) basic concepts regarding corporate by-laws.

1.  They are a Blueprint for Your Corporate Operations

By-laws are a written document that contains the rules and regulations that govern your corporation’s operations.  Essentially, it is a blueprint of what the corporation may or may not do. By putting these parameters in writing, the corporation may avoid future conflict and improve the efficient operations of the corporation.

2.  They are Not the Same Thing as the Articles of Incorporation

In contrast to by-laws, a corporation’s Articles of Incorporation are formation documents that contain only preliminary information about the corporation, such as the corporate name, address and number of authorized shares.  

While a corporation’s Articles of Incorporation are filed (usually with the Secretary of State) and are therefore made available to the general public, a corporation’s by-laws are a private, internal document to be viewed only by corporate insiders.

3.  They are One of the First Corporate Documents Your Business Needs

The by-laws should be drafted immediately after a new corporation is formed, either by the incorporator (the person who formed the corporation) or by the corporation’s board of directors.  Regardless of who actually drafts them, the by-laws should be adopted (approved) by the board of directors immediately, as one of their first acts as a board.

4. At a Minimum, the By-Laws May Should Contain Certain Key Provisions

What is written into the by-laws varies from corporation to corporation, however, at a minimum, the following provisions should be included in a corporation’s by-laws:

  • The corporation’s important information (corporate name, mailing address, and principal place of business)
  • Number of authorized corporate officers and directors
  • Number and classes of shares of corporate stock to be authorized and issued
  • Procedures for director and shareholder meetings
  • Corporate record-keeping rules, including the preparation and inspection of records
  • Defining what would be considered a conflict of interest for the corporation’s officers and directors
  • Rules regarding amending the articles of incorporation and by-laws

5.  They May be Modified in the Future

After the by-laws have been drafted, copies should be distributed to corporate insiders, such as shareholders, officers and directors.  The by-laws should contain provisions for how and when they may be amended. Whenever by-laws are actually amended, the amended by-laws should also be distributed to the corporate insiders.

Whenever necessary, the by-laws should be referred to for business operations.  Whenever provisions of the by-laws become outdated or no longer benefit the corporation, as written, they should be modified.  This will ordinarily require a vote by the board of directors and should be detailed in the by-laws themselves.

If you are forming a corporation or are thinking of forming a corporation, you should certainly have an attorney available to assist you with all facets of its formation, including the drafting of by-laws.  Should you find yourself in this position, contact the Greenbaum Law Firm, P.A. to schedule a consultation today.

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Greenbaum Law Firm, P.A.

The Greenbaum Law Firm, P.A. is a boutique, client-centric law firm concentrating in the areas of business and corporate law, contracts and agreements, and real estate. Our unique approach to the practice of law consists of positioning our clients at the center of the legal practice and pursuing their objectives in the most efficient and transparent manner.

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