Corporate bylaws are the blueprint for your corporation. Bylaws outline the structure of your company, as well as addressing your corporation’s ownership. Bylaws explain how your company is organized, the duties of various positions and individuals, rights and responsibilities of shareholders and administrators, and guidelines that will prevent your corporation from running aground.
When you incorporate in Wyoming, there is often confusion concerning the difference between Articles of Incorporation and Corporate Bylaws. Though the confusion is understandable, the two documents are very different.
Articles of Incorporation Address:
- Corporate name
- Registered agent
- Mailing and principal office addresses
- Number and class of shares of stock
- Incorporators names and addresses
As you can see, there is little here other than contact information. Articles of Incorporation serve mostly as a registration document for the Secretary of State.
Bylaws, however, are not filed with any government agency and cover far more extensive ground.
Corporate Bylaws Include:
- Corporate name and location
- Purpose of the company
- Initial shareholders (ownership shares, voting rights, responsibilities, etc.)
- Board of Directors (rights and responsibilities, duties, etc.)
- Corporate officers (rights and responsibilities, duties, etc.)
- Meetings (locations, time, procedures)
- Conflicts of interest
- Sale of stock (restrictions, procedures)
- Amendment process
Corporate Name and Location
This is pretty straightforward. Be sure to list your company’s full name, any trade names being used, and the physical principal office address.
Purpose
A corporation must have a purpose. This doesn’t need to be detailed, but it should outline the main reason you’re in business. What kind of business are you in? What product/services does your company offer?
Initial Shareholders
These are your initial owners. Bylaws detail each shareholder’s ownership share: the amount of the company’s stock that each member owns. It should also list what each member gave in exchange for those shares.
Bylaws need to explain thoroughly what shareholders are expected to do within the company, especially if there are different types of membership. You should also detail shareholder rights, specifically what voting rights come with what shares of stock.
It is wise to include disciplinary procedures here, so that it is clear to all members how any disciplinary action will be handled.
Board of Directors
Your corporation will need to appoint a Board of Directors. As with the initial shareholders, the corporate bylaws need to cover what the rights, responsibilities and duties of the directors are.
In addition, you should address the composition of the Board itself: how many members are needed, minimum and maximum numbers, how directors are appointed and removed, length of terms for directors, etc.
Corporate Officers
Corporate officers are usually members of the Board of Directors who serve specific functions within the company, such as President, Vice President, Treasurer, and Secretary. Bylaws lay out the specific duties of these positions, their rights and responsibilities, how they are selected, etc.
Meetings
Corporations are required to hold an annual shareholders meeting each year, but this is not likely to be the only meeting. Bylaws should discuss all annual meetings, when and where they will be held, operational procedures, and any stipulations for how votes will be conducted.
You should also address how special meetings can be called, as well as how a meeting time/location can be altered for special circumstances.
Conflicts of Interest
Conflicts of interest are bound to arise within a corporation. It is absolutely crucial for you to include how they will be addressed, not only for the internal well-being of the corporation, but to prevent interference from the IRS.
It is unethical for corporations to provide unfair advantages and benefits to the directors or corporate officers of a company. Bylaws should lay out a clear path for how to avoid and handle any conflicts of interest that arise.
Sales of Stock
Many corporations have specific procedures and controls for how stock can be sold. Generally this is done to limit how ownership can change hands. For example, you may want a provision that stipulates shares of stock must first be offered to other members before being offered to an outside party.
Bylaws should outline exactly how stock can be sold and any requirements that must be met in order for a sale to be considered legitimate.
Amendment Process
Bylaws should not be viewed as an eternal, unchanging document. They need to be created to be flexible. For this reason, you should discuss how amendments can be made to your corporate bylaws. You need to detail the specific process for amendment, who can put forward an amendment, how many votes are needed for approval, and who can vote on an amendment.