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Corporate bylaws are, quite simply, the rules that run an organization. However, they can also be a bit difficult to understand for those of us that are not lawyers and have no experience with business law. If you are a new business owner, you may be wondering if you need to create corporate bylaws for your organization. Find out all about corporate bylaws, who requires them and what they do for an organization in this guide below.
What Are Corporate Bylaws?
Corporate bylaws are the rules used to establish and regulate business operations. Corporate bylaws can set the standard for operations in a consulting business, manufacturing company or online retailer. These help to make business operations uniform, which helps make the inconsistent would of business a bit more predictable. When workers know what is expected of them, they work better. Corporate bylaws help make this possible.
What Are They Used For?
Corporate bylaws are used to establish guidelines for operations. But, they are also used for a number of more specific reasons. They can also be used to identify the job responsibilities of offices and other types of employees. These business laws can also set guidelines for shareholders meetings or executive board meetings. Or, they can even outline how business records are maintained and how company stock sales and trades function. Clearly, these types of bylaws can be very useful for business operations.
Who Needs Them?
Corporate bylaw requirements vary by state. So naturally, as a business owner, you are probably wondering whether or not your need to create corporate bylaws. That depends on what type of business organizational structure you are running. If you own an S-corp or a C-corp, the odds are high that you will need to create corporate bylaws in case of a Chapter 7 or 13 bankruptcy. If you own an LLC or a sole proprietorship, on the other hand, you may not be required. Make sure to verify corporate bylaw requirements with your state to be safe.
How Are They Different From Operating Agreements?
Operating agreements and corporate bylaws sound like very similar concepts. That is because they are essentially the same thing. However, the two things are used by different types of businesses. Corporate bylaws are used by corporations to establish a business framework. Operating agreements are used by LLCs and sole-proprietorships to establish guidelines for business operations. These are both entirely different from articles of incorporate, which is important to note if you own a C-corporate or an S-corporation. Be sure to establish guidelines for operating your business that match the type of organization you run.
What Do They Include?
Corporate bylaws should include a number of different sections to address various areas of business operations. These documents should include identifying information about your business, such as address, name and other general information. It should also include the number of corporate officers and directors your business has, as well as their information. Types of shares and stocks that your business is allowed to offer should also be included. Procedures for meetings and corporate record keeping practices should also be designated in this document. Finally, be sure to define what conflict of interest means for your organization like working with Proliant financial. Also, include procedures for amending corporate bylaws should a need arise in the future. This will help you protect your business from all different types of risk.
Many business owners start their own business before they really know what they are doing. Sometimes it works out. When it does, that does not mean you can just keep charging ahead without concern for business regulations or laws. That is why you need to learn up corporate bylaws. If your organization is a c-corp, s-corp or even a b-corp, you probably need to create articles of incorporation and then create corporate bylaws to follow. Use the guide above to help you determine whether you need to create corporate bylaws for your business. Then, make sure to include all the necessary elements to help protect your business success for years to come.
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