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What You Need to Know About Bylaws for a Corporation

By Lane V. Erickson, Idaho Business Attorney

The focus of many of the articles that we post about businesses have to do with making sure you have the right documentation in place for your business structure. The reason for this is that the documentation controls many things about your business.

When it comes to a regular corporation or a nonprofit corporation the business documents are just as important as they are for an LLC or a partnership or any other type of business entity. Perhaps the most important single document you can create for your corporation is the bylaws.

The bylaws are the documents that control the business. The bylaws for a corporation are like the operating agreement for an LLC. They determine how the corporation is organized, how the management structure will operate, how voting occurs, and so forth.

At Racine Olson, our team of Idaho business attorneys work with our corporate clients in helping to create a corporation and the documents that control it, including the bylaws. Our talented team includes partners Lane Erickson and TJ Budge, and attorneys Nate Palmer and Dave Bagley. Each of our lawyers have the experience, skill, and knowledge, to provide sound legal advice to each of our business clients. We have helped numerous Idaho business owners make good decisions so their business can succeed. We are confident we can help you too.

The purpose of today’s article is to talk about what you need to know about bylaws for your corporation. Regardless of whether your corporation is brand-new, or has been operating for several years, the information in this article should be helpful to you and your corporation. However, no single article can provide all the information that may be needed to answer your questions. If you have questions about your corporation, your corporate documents or any other thing related to your business, please contact us for a free consultation. We would be happy to answer your questions and see if there are ways that we can help you and your business continue to succeed.

Who Creates the Bylaws?

We will start this article by discussing who creates the bylaws. Typically, bylaws are created by the individuals who begin structuring the corporation itself. In an ideal world, the bylaws will be created before the corporation is. In other words, in a perfect world, the owners of the business have thought everything through and have all their corporate documents in place before they even begin registering the corporation with the Idaho Secretary of State’s office.

However, we know we do not live in an ideal world, which means that sometimes, in fact most of the time, the bylaws are created sometime after the corporation has been registered. In fact, sometimes some business owners create their corporation and don’t even know that they need to have bylaws in the first place. They could operate their business for several years without having any bylaws in place.

So long as the owners of the business all work together harmoniously, and there are no issues or problems that arise, not having a set of bylaws likely won’t be a problem. However, when issues of management come up, or when the owners don’t agree on how the business should operate, or the owners decide they want to bring a new owner into the business, the need for having well-thought-out bylaws for the corporation becomes clear.

So, simply put, the owners of the business create the bylaws. If you are working with a business attorney in creating your corporation, they will help you get the bylaws in place. If this hasn’t happened, you can always reach out to a qualified business attorney to help you create bylaws for your corporation.

What Should Be in Your Bylaws?

Now, on to the important question, which is what should be in your bylaws? The information in the bylaws falls into several categories. The first category would be the basic information for the business. This would include the corporation name, the purpose of the business, and the physical location of the business.

Next, there should be information in the bylaws about who the shareholders or members or owners of the corporation are. The bylaws will explain how a person becomes a shareholder and will identify the different types of shares that can be owned through the corporation. This section, dealing with members, will also talk about how members can vote their shares in order to create a management structure for the corporation.

The top rung on the ladder of management for a corporation is the board of directors. The shareholders have the ability to vote their shares to name board of director members. The bylaws will contain information on how board of directors are voted in, how many directors there are, and the duties and responsibilities for the board of directors. The bylaws will also discuss the meetings the board of directors must hold, and the information that the board of directors must then provide to the corporation and to the shareholders.

The bylaws will then discuss the officers of the corporation. Officers are either hired or voted in by the board of directors. The bylaws will explain who the officers are, what their titles are, and what their duties and responsibilities are in these roles. Typically, for a corporation, there is a president, sometimes called a CEO, one or more vice presidents, a secretary, and a treasurer. There could also be other officers identified and described in the bylaws.

The bylaws will also provide detailed instructions about the procedures used for filling vacancies when an officer is terminated or quits. There should also be information about how an officer can be removed by the board.

These are just the beginning things that should be in every set of bylaws. The bylaws can also contain a good deal of other information about the structure, management, and operation of the business.

Can You Change the Bylaws?

Finally, the bylaws should contain language in them that explains how the bylaws themselves can be amended, revised, or revoked. Usually, language in the bylaws would establish the number of votes by the shareholders that have to be cast in order for the bylaws to be changed. Also, there usually has to be some process described for providing information to the shareholders and the board of directors about what the suggested changes to the bylaws are so that the correct procedures in voting opportunities can take place.

If the proper procedures are followed, the bylaws can be amended or changed in any way. This sometimes happens when new owners come into the business, or when the business absorbs another business, or when the business itself is not succeeding and changes need to be made in its operations, management, or ownership.

Again, this article is just a summary of the importance of bylaws for your corporation. If you have questions or concerns about your corporation, and how the bylaws should be set up to help your business operate successfully, we can help. We have assisted numerous Idaho business owners of the creation and operation of their corporations, and we are confident that we can help you too!

ENLIST AN IDAHO BUSINESS ATTORNEY TO HELP YOU

Our team of Idaho business lawyers can help you with any of your business structure or operation needs. Whether you are seeking to create a new business or review a current business, we are available to discuss your options and answer your questions at an initial free 30-minute consultation. Call us toll free at 877-232-6101 or 208-232-6101 for a free consultation. You can also email us directly at lane@racineolson.com or stop by our office at 201 East Center Street, Pocatello, Idaho 83201. We will answer your questions and help you solve your Idaho business problems.

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