If you've gone into business with others, then most likely you've heard the term "bylaws" thrown around. The term refers to the set of rules that a board of directors sets that a business entity must abide by when incorporating itself. Bylaws are often written by a corporation's owners when it's founded.
Bylaws are different from a company's Articles of Incorporation in that the former doesn't have to be filed with state or federal authorities as is the case with the latter. Even though bylaws aren't required to be filed with the Secretary of State, it's still important to keep them within easy reach in case your company gets audited.
Within your corporate bylaws, you should identify where the company's main headquarters is as well as whether it's a public or private entity. The bylaws should also include a listing of the different individuals that comprise your company's board of directors. It should list their roles, how long their tenure is expected to last and the procedure for replacing them.
Also important is that it's clearly spelled out how many board votes are necessary for a resolution to be passed.
If the company is public or otherwise offers stock options, then it's important for the bylaws to clearly spell out the different classes of shares it had made available for purchase as well as shareholder's voting rights. It also should provide details about how shareholder meetings will be handled, including how notifications will be made that they're happening and how proxy voting will be dealt with.
Bylaws should also address how often board meetings are anticipated to occur, where they'll be held and any specific protocol that will be followed during them. Additionally, the bylaws should outline how the corporation's record keeping will be maintained. Any procedures that must be followed to amend bylaws should also be specified in this document.
While it's possible for company owners to draft their own bylaws, it's not recommended. That's because it's important that they address many different aspects of your business operations.
Any failure to include pertinent details in this complex document could result in you not being in compliance with certain obligatory legal or tax requirements. A St. George, Utah, business organizations attorney can ensure you avoid headaches down the road.
Source: The Balance, "What are bylaws for a corporation?," Jean Murray, accessed Sep. 15, 2017