We are often asked the question, “what should I have in my bylaws and why do I need them?” Bylaws are the rules used to govern any for profit or nonprofit corporation. Every such corporation must have bylaws. The bylaws determine how the business is going to operate.
Simply put, bylaws are a set of rules that the owners of a company adopt for their own company. If there are questions about operations of the company, they would look first to the mandates set forth in the bylaws. If there are disagreements among owners of the company as to what is to be done, the bylaws are intended to address and resolve those disagreements to avoid disputes that would cause the business owners to have to dissolve the company or file suit.
Bylaws will set forth the scope of business of the company, and the primary location of the company. Additionally, bylaws will define the composition of the board of directors, including how many directors are to be seated, how the directors are selected, and how meetings are to be held. Bylaws will also determine how the officers are to be chosen from among the board of directors, including such positons as president, vice president, secretary, and treasurer.
The bylaws also determine how budgets will be set, moneys managed and who has authority to issue checks on behalf of the company. Bylaws will determine accounting procedures and whether to conduct annual audits.
With a for profit company, the bylaws will also address stock issuance and dividend payments. The bylaws will determine categories of stock to be issued, manner of issuance, and authority for stock certificates.
The bylaws should also include what will happen upon conclusion or dissolution of the company. If the company is dissolved, the bylaws will determine what is to be done with company assets. The bylaws themselves will set forth how any amendments to the bylaws will be adopted.
The bylaws should be adopted at the first meeting of the board of directors upon the creation of the organization. The organization should keep track of all subsequent meetings, as reflected in the minutes of those meetings, and continue to track any changes to the bylaws.
It is generally recommended that bylaws be reviewed on an annual basis, to be sure that the bylaws reflect the ongoing desires and operations of the company, and to confirm that the company is in compliance with its bylaws.
If you have questions about these matters, or any other business matter, please feel free to contact us at any time.