The earliest form of bylaws can be traced to ancient Greece when religious organizations inscribed their statutes onto stone marble tablets. Today, bylaws continue to play a pivotal role in how modern-day businesses, non-profits and public institutions are formed and run by their board directors, members and officers.
From corporations to churches, bylaws vary according to the type of organization they serve. However, most include basic information, such as the location of the principal and registered offices, the existence and responsibilities of the organization, and the size and function of the Board of Directors.
Why Businesses Adopt Corporate Bylaws
Unlike a corporation’s Articles of Incorporation, corporate bylaws are non-public documents used for internal governance purposes. Bylaws are meant to supplement the Articles of Incorporation by defining more specifically the powers, responsibilities and rights of the business, directors and shareholders.
Though corporations are not required to file bylaws within the state of their incorporation, most state offices do require businesses to adopt Articles of Incorporation and bylaws that comply with state law. Since the law also requires owners of corporations (including S-Corps) to form a Board of Directors, U.S. government agencies such as the Small Business Administration advise writing comprehensive bylaws detailing items such as board duties, membership requirements and other operational procedures.
Additionally, corporate bylaws help your business accomplish the following objectives:
- Provide your business with formalized procedures that help manage and resolve corporate legalities.
- Create legal documentation (i.e. a paper trail) that demonstrates your organization is following traditional business formalities.
- Create transparency, instilling trust among your Board of Directors and, ultimately, your shareholders and employees.
General Structure of Corporate Bylaws
Depending on the size and complexity of your business, your bylaws may cover one or more of the following elements:
- Name and purpose of the organization: states the official name of your business as well as any other names used to refer to your business. This section also defines the primary purpose of the business and office locations.
- Officers and Board of Directors: describes the size, role and duties of the Board of Directors as well as election procedures, officer titles, terms of office and how decisions are made by officers and/or members. This section should also explain how the bylaws can be amended (see section below).
- Membership: explains members’ rights and limitations, and any requirements for membership. If membership is open, or if membership fees are required, then it should be stated in this section of the bylaws.
- Meetings: detail the rules and procedures for annual meetings and board meetings as well as the time and place requirements. Special meetings as well as the preparation and delivery of annual reports are also covered in this section of the bylaws.
Once corporate bylaws are drafted, distribute copies to board members or the individuals responsible for reviewing, finalizing and approving the final draft. State laws typically require businesses to keep copies of bylaws at their principal or registered office.
Amending Corporate Bylaws
As your business grows and evolves over time, you’ll want to revise your bylaws to reflect the organization’s new direction. Typically, only the incorporators or initial directors possess the authority to adopt and amend the corporate bylaws.
Before implementing any changes, file a resolution to ensure the majority of your shareholders have agreed to change the bylaws. Allowing room for amendments ensures that board members and officers not only remain familiar with your corporate bylaws, but are able to assess whether the bylaws accurately reflect the mission and goals of your organization.
Bylaws are a logical and necessary step to establishing strong governance policies when forming your business. Given the different types of business structures available, examples abound of different bylaws structures and ideas. Ultimately, you’ll need to draft a set of standard rules and procedures that are customized for your board and organization as a whole.
Refer to standard templates and common clauses used by similar businesses and organizations for helpful guidance on writing satisfactory bylaws. You can also try this customizable bylaw service, enlist the help of an attorney or use software such as Nolo Press’ eForm: Corporate Bylaws to figure out the requirements of your Articles of Incorporation or corporate bylaws.