How to Create Company Bylaws

 
 
How to Create Company Bylaws
 
 
 

If you own a C corporation, don’t underestimate the importance of written bylaws.

 

Bylaws state how your company works and how disputes are handled. Why is it so important? Clear company bylaws can save your business if someone decides to take your (ahem) assets to court one day.

Do you even need bylaws?

If you're forming a C corporation, then the answer is yes. You typically need written bylaws in place to protect shareholders.

Plus, investors aren’t likely to risk their money on a company that doesn’t clearly define its operations. Create a written agreement (with your lawyer, of course) that governs how the company works.

How do I write bylaws? What do I need to include?

Since bylaws are a written form of legal protection, we once again recommend you consult a lawyer! Otherwise, you might miss one of the many details you need to protect your business:

  • Meeting Location, Notice + Manner, Quorum, Voting, Proxies

    • All of these details relate to the annual shareholder meeting your business is required to host as a C corp.

  • Board of Directors Names, Duties, Actions, Election, Terms, Resignations, Removal, Fees and Compensation, Committees

    • Since your board of directors have the invaluable task of advising on the direction of your business, you want to vet who is on the board carefully and be sure to compensate them appropriately.

  • Indemnification Of Directors And Officers, Insurance, Conflicts of Interest

    • With the recent spat of directors and C-level execs engaging in workplace harassment without facing consequences, you also need to institute protections for your employees.

  • Accounting and Fiscal Year

    • For a C corp, filing taxes correctly is especially important given that your business goes through double taxation.

  • Maintenance And Inspection Of Records

    • Save yourself a lot of trouble, and outline your documentation standards rigorously. If your company deals with data, determine data governance and privacy protections for your consumer (especially in light of Europe’s Global Data Privacy Regulation).

  • Stock Certificates and Notices, Dividends

    • All right, we’re getting to the exciting part! Hash out how you want stock certificates to be granted to your shareholders and the conditions of dividend payouts.

  • Stockholders of Record

    • Name your stockholders of record (AKA the individuals/entities that act as the registered holders of the issuer’s securities). Note that dividends and distributions are only paid to the stockholders of record.

 

     
     

     

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