Corporate by-laws are the rules for how a corporation is run. In the US, they’re typically created during the incorporation process and detail how decisions get made, who has the authority to make them, and how the company operates. By-laws give the corporation structure and direction and help avoid confusion or conflict in the future. They set clear expectations and govern how often board meetings are held, how voting works, how new board members get elected, and how the company can issue new shares. US law requires that most corporations have by-laws.

While by-laws might sound a bit formal, they’re important for transparency and legal protection as the business grows. Below, we cover information included in corporate by-laws, a template for how to draft them, and guidance on how to design by-laws that fit your company’s needs.

What’s in this article?

• What are corporate by-laws?
  
• What should you include in corporate by-laws?
  
• Example of corporate by-laws: A complete template
  
• How to draft corporate by-laws that fit your business
  

What are corporate by-laws?

Corporate by-laws are a company’s foundational governing document. They lay out how things should run day-to-day and the processes for making important decisions. They serve as a legal contract between the corporation and its shareholders, directors, and officers and set the protocol for how the organisation operates. They also ensure the company complies with state and federal laws.

Founders typically adopt corporate by-laws when they incorporate a business. While the by-laws aren’t generally filed with the state, they’re legally binding and can be used in court during disputes. For larger or more complex companies, by-laws can be fairly detailed, especially regarding different classes of shares or specific agreements between shareholders. But even for smaller businesses, bylaws help avoid misunderstandings and ensure the company runs smoothly as it grows.

What should you include in corporate by-laws?

The specific provisions of corporate by-laws vary slightly for each company, depending on its unique considerations and how it does business. But here’s an overall look at what’s typically included:

• Board of directors: The by-laws define the board’s structure, powers, and operations. This includes how the business elects directors, how long they serve, and what happens if they need to be replaced. By-laws also set the rules for meetings, such as how many directors must be there (i.e., a quorum), how votes happen, and what committees might be in place.

• Officers and their roles: By-laws outline the roles of the company’s key officers (e.g., chief executive officer [CEO], chief financial officer [CFO], secretary) and define their responsibilities. The by-laws also explain how the business appoints or removes officers and who has authority to make decisions within the company.

• Shareholder meetings: By-laws also define how the business holds shareholder meetings (both annual and special meetings). They also lay out how the business notifies shareholders about meetings, how voting works (including proxy voting), and how the company transfers or sells shares.

• Conflicts of interest: By-laws establish how to handle any potential conflicts of interest, especially regarding board members or executives. These rules foster transparency and accountability so all officials act in the company’s best interests.

• Amendments: These rules establish how the by-laws can be updated or amended over time.

• Other corporate procedures: By-laws also often detail procedures such as director and officer indemnification, company record-keeping, fiscal year setting, and company dissolution.

Example of corporate by-laws: A complete template

Here’s a sample template for basic corporate bylaws. This template covers the essentials for most corporations, but additional sections or modifications might be necessary.

CORPORATE BYLAWS OF [COMPANY NAME]

ARTICLE I – OFFICES

Principal Office
The principal office of the corporation will be located at [Address]. The board of directors may change the location of the principal office at any time.

Other Offices
The corporation may have additional offices as determined by the board of directors.

ARTICLE II – SHAREHOLDERS

Annual Meeting
The annual meeting of shareholders will be held at [Time] on [Date] of each year, or at such other time and place as the board of directors may determine, to elect directors and transact any other business that comes before the meeting.

Special Meetings
Special meetings of shareholders may be called by the president, the board of directors, or shareholders holding at least [Percentage] of the outstanding shares.

Notice of Meetings
Written notice stating the place, date, and time of any meeting of shareholders must be given to each shareholder entitled to vote at the meeting not less than [Number] days and not more than [Number] days before the date of the meeting.

Quorum
The holders of [Percentage] of the shares entitled to vote at a meeting, present in person or by proxy, will constitute a quorum.

Voting Rights
Each shareholder will have one vote for each share of stock held. Voting may be done in person or by proxy.

ARTICLE III – DIRECTORS

General Powers
The business and affairs of the corporation will be managed by its board of directors.

Number and Qualifications
The number of directors will be [Number], unless changed by amendment to these bylaws. Directors need not be residents of the state or shareholders of the corporation.

Term of Office
Each director will hold office for [Number] years or until their successor is elected and qualified.

Meetings
Regular meetings of the board will be held [Frequency] at [Location], unless the board designates otherwise. Special meetings may be called by the president or any two directors.

Notice
Notice of regular or special meetings of the board will be given at least [Number] days before the meeting.

Quorum and Voting
A majority of the board will constitute a quorum. The act of a majority of the directors present at a meeting at which a quorum is present will be the act of the board.

Vacancies
Any vacancy on the board may be filled by a majority vote of the remaining directors. A director appointed to fill a vacancy will serve for the unexpired term of their predecessor.

Indemnification
The corporation will indemnify its directors and officers to the fullest extent permitted by law against any expenses, judgments, fines, and amounts paid in settlement reasonably incurred by such persons.

ARTICLE IV – OFFICERS

Officers
The officers of the corporation will be a president, a secretary, a treasurer, and any other officers the board deems necessary.

Election and Term
The officers will be elected by the board of directors at its first meeting following the annual shareholders’ meeting. Officers will serve for a term of [Number] year(s) or until their successors are duly elected.

Duties

• President: The president will be the chief executive officer of the corporation and will supervise and control the business and affairs of the corporation.
  
• Secretary: The secretary will keep the minutes of the meetings of shareholders and directors and see that all notices are duly given.
  
• Treasurer: The treasurer will have charge and custody of all funds and oversee financial records of the corporation.
  

Removal of Officers
Any officer may be removed by a majority vote of the board whenever the board determines it is in the best interest of the corporation.

ARTICLE V – COMMITTEES

Executive Committee
The board of directors may designate an Executive Committee consisting of [Number] board members, giving this committee the powers and authority of the board in the management of the business and affairs of the corporation.

Other Committees
The corporation shall have other committees that may be designated by the board of directors.

ARTICLE VI – RECORDS, REPORTS, AND SEAL

Records
The corporation will keep correct and complete books and records of account and will also keep minutes of the proceedings of its shareholders and board of directors.

Reports
The board shall create any annual or periodic reports required under law to be prepared and delivered to an office of this state.

Corporate Seal
The board of directors may adopt a corporate seal, which will have inscribed thereon the name of the corporation and the state of incorporation.

ARTICLE VII - GENERAL MATTERS

Dividends
The board of directors may declare dividends, subject to the provisions of the articles of incorporation and applicable law.

Fiscal Year
The fiscal year of the corporation will begin on the [Date] of [Month] each year and end on the [Date] of [Month].

Transfer of Stock
Transfers of stock shall be made only upon the transfer books of the corporation or by transfer agents designated to transfer shares of the stock of the corporation.

ARTICLE VIII – AMENDMENTS

These by-laws may be amended or repealed by a majority vote of the board of directors or by the shareholders.

CERTIFICATION

I hereby certify that these by-laws were adopted by the board of directors of [Company Name] on [Date].

[Secretary’s Name]
Secretary

How to draft corporate by-laws that fit your business

If you want your corporate by-laws to work for your business, they need to fit how your company operates. Here’s how to draft by-laws that don’t just follow common practices but support your specific goals:

• Leadership roles: Decide how many directors and officers you really need, and clearly define their roles based on how your business runs.

• Voting and shareholder rules: Adjust voting rights and meeting rules to fit the size and structure of your company. Smaller companies might want more flexibility or fewer formal meetings.

• Meeting frequency: Detail how often your board or shareholders meet, whether annually, quarterly, or as needed.

• Conflicts of interest: Add specific rules to prevent conflicts of interest, especially if your business is subject to industry regulations.

• Indemnification: Decide how much protection from legal risk you want to offer your directors and officers.

• Amendments: Set a process for changing the bylaws, whether a simple majority vote or something more restrictive. Build in flexibility so your bylaws can evolve as your company grows or changes.

• State compliance: Make sure your by-laws follow your state’s specific legal requirements.

• Industry-specific rules: Add any specific guidelines that apply to your business’s industry, such as compliance or audit procedures.

• Shareholder agreements: If you have a shareholder agreement, make sure it lines up with what’s in the by-laws, especially on key decisions.