Did you know that your operating agreements and bylaws can be an important way to protect your company and to clarify your goals? Both of these kinds of documents can be a critical way to guard against risk and to get everyone on the same page. It might be tempting to copy and paste someone else’s documents or to create them yourself, but this kind of task calls for an experienced business lawyer.
There are so many different steps involved in starting a business that it can seem overwhelming or easy to skip some of the more important ones. One of the most important things you need to understand are corporate bylaws. These simply refer to the internal rules of your organization. They help to ensure that your company runs smoothly and that you have a clear structure for the business. These fundamental rules outline how everyone inside the company will operate including executives, shareholders and employees.
What are Corporate Bylaws?
Corporate bylaws are specific to C Corps or S Corps but an operating agreement may serve similar purposes for a limited liability company. In the event that you have not yet incorporated it in your business, then creating rules of operation is certainly not mandated but it may be strongly recommended.
Corporate bylaws or an LLC operating agreement are internal documents that are maintained at the primary business location for the company. Specific regulations and rules of the business may be outlined within this. The average bylaws for a corporation will include:
- Procedure for director and shareholder meetings
- How many directors and corporate officers the corporation has?
- The types of shares issued by the corporation
- The corporation’s name and contact information
- The procedures under which corporate records will be kept
- The procedure for identifying amendments to articles of incorporation and bylaws
LLC agreements may detail, however:
- The procedure for managing the LLC
- The procedure for alterations and ownership
- The responsibilities, rules and names of individual members
- The share of the business that is owned by each member
Depending on your type of business, you may or may not be required to establish corporate bylaws but many states require them for corporations classified as C Corps or S Corps. In the event that you’re running an LLC, an operating agreement may not be required by your state but it could help add an additional layer of protection for your business. Consulting with an experienced business attorney is strongly recommended.