The Value of Well-drafted Bylaws for Your Startup Business

Creating a Structure to Effectively Manage Your Company

In an earlier blog, we identified the key documents to put in place when launching a new business enterprise. Among the most important is a set of bylaws. If you’ve been involved in any type of nonprofit or for-profit organization, you’ve likely heard reference to the “bylaws.” But what are bylaws, what purpose do they serve, and how can they help your business succeed?

What Are Bylaws?

Bylaws are written rules regarding the governance of a corporation, limited liability company, partnership, or nonprofit organization. Typically, the preparation and approval of bylaws is the first business conducted by the board or directors or other governing body of an organization. Bylaws establish the rights and responsibilities of directors and officers, how directors are elected, the number of directors, the duties of board officers,and the procedures for removing a board member. Bylaws also typically statehow often board and shareholder/owner meetings must take place and establish voting rights. For corporations, bylaws indicate whether stock shares will be heldprivately or publicly.

Other common provisions of the bylaws include:

• The process for amending articles of incorporation and bylaws
• Maintenance of company records
• Method for approval of loans, contracts, disbursements, and stock distributions
• Corporate resolution requirements to conduct company business
• Conduct of financial audits

The Benefits of a Well-drafted Set of Bylaws

Clear and well-defined bylaws can help your business entity in a number of ways:

• Meetings will run more smoothly—Bylaws can provide a structure for conducting business at shareholder, owner, or board meetings. They help prevent individuals from taking over a meeting and allow meetings to be more productive.
• There will be less likelihood of disputes over process—The by-laws allow everyone to know the rules in advance.
• Bylaws can ensure that new members are quickly brought up to speed.

Contact MCIS Law

At MCIS Law, PLLC, in Stafford, we provide comprehensive counsel to startup and existing businesses in southeast Texas. For a confidential consultation with an experienced and knowledgeable lawyer, email us or call our office at (346) 297-0121. We accept all major credit cards.