Articles of incorporation and bylaws are documents that set up the structure of a business and define its legal rights, responsibilities, and processes. When a company files articles of incorporation, the state officially recognizes the company as a formal corporation and assigns it a unique legal identity and tax status. Incorporating a business allows it to gain certain benefits, including favorable tax advantages and the ability to issue shares of stock.
While the process of filing articles of incorporation is relatively simple, it can be difficult to get them approved by a state agency. To avoid costly delays and potential liability, it is important to know the specific requirements for the formation of a business before drafting and filing these documents.
Bylaws are a more detailed set of rules and procedures that establish how a business will operate. They also dictate the roles and responsibilities of directors and officers within the business.
Corporate bylaws are a crucial part of the governance of a corporation, and they should be drafted by an attorney who knows how to craft them in accordance with state regulations. Generally, the lawyer will meet with the owner of the company to learn more about the business and the goals of its bylaws before starting the draft.
Developing a set of bylaws is a time-consuming, but necessary task. Ideally, a group should sit down and work through the bylaws together before they are drafted or approved. Having this discussion well in advance will save everyone time and make it much easier to avoid a conflict over what the bylaws should include.
The bylaws should be written in a way that makes sense to the members of the organization. They should also reflect the direction the group is heading in, and be written in a manner that distributes power fairly among the members. Getting the bylaws written in an efficient and timely fashion will help to ensure that members are aware of their role and responsibilities in the organization and that they are not left with questions about what is expected of them.
Nonprofit corporations should also have bylaws that outline how to handle board elections, selection of directors, and other issues affecting the board’s role in the organization. It is also a good idea to have some form of succession planning in place, so that the organization can be passed on when an officer or founder passes away.
Incorporating a nonprofit helps to secure your group’s name, limit personal liability for the directors and increase its credibility as an established organization in the community. It also may allow you to apply for a tax exemption.
You should also include a statement of purpose in the bylaws, which defines your group’s primary focus and keeps you on track with your goals. This may sound obvious, but it’s often overlooked in the rush to organize and start a new group. It’s especially critical if your group is focused on a single cause or issue, as it can be easy to get caught up in the details of running the business and lose sight of why you’re doing it.
