Incorporating your business is often seen as an important step in a company’s growth and development. If you have aspirations of extending your company’s footprint beyond that of just being considered a small business, then you’re likely to reach a certain point where it becomes necessary to separate your company from any connection whatsoever to your own personal assets. Through incorporation, your business becomes its own legal entity. However, simply filing for a corporate status is only a single step in the process. In order to retain such a status, you have to have corporate bylaws in place that assist you in meeting the standards of incorporation. The initial step to turning your small business or general partnership into a corporation is preparing and filing your articles of incorporation. This ultimately could prove to be the easiest part of the process simply because there are very strict rules and standards that govern this step.
Detailed instructions are given regarding what information is required, and the articles must be filed with the secretary of state. Corporate bylaws, on the other hand, do not have filing requirements nor are there any rules saying when a corporation must create them or what they should contain. So why does your business need them? The answer is simple: It is your corporate bylaws, not your articles of incorporation, that will guarantee your corporate status over the long-term.
Who’s Watching Your Business?
If you’re like most business owners, then your primary purpose in seeking incorporation is to gain the financial security that was mentioned earlier. Yet authorities will continue to monitor your company’s operations even after you’ve incorporated to determine whether you actually function as a corporation or are simply looking to use your status to develop a professional “alter ego.” The indicators they search for to determine if this is actually the case include:
- You and your partners constantly underfunding your company
- Not meeting industry standards regarding financial reporting to your stakeholders
- A failure to have consistent shareholder meetingsIf it’s discovered that your company is demonstrating neglect in these areas, you could potentially have your corporate status revoked.
How Corporate Bylaws Help Keep You On the Straight and Narrow
Having a strict set of corporate bylaws in place at the time of your incorporation can help to avoid any such issues. Adhering to them should help satisfy all the standards your corporate status requires of you. Therefore, you should outline basic procedures in your laws regarding the stock classes and amounts you intend to issue, the frequency and format of your shareholder meetings, and the standards and auditing processes for your record-keeping methods. Yet that is not all. Your bylaws should also clearly state all of your identifying information, including the names of your directors, corporate officers, and professional partners. Within your bylaws should also be details on how you can amend them if you, your ownership team, and your shareholders decide such a step is necessary in the future.
Beyond simply giving you a set of directions to maintain your corporate identity, your corporate bylaws can also be used as tools to build trust with potential partners and investors. As they state who you are and how you manage your business, they offer an easy way for these outside parties to truly get to know important details regarding who you are, how you may have got to the position you’re in, and how you intend to maintain and exceed it. Remember that incorporation is the beginning of your journey toward establishing a successful corporate enterprise; the road map that will get you to where you ultimately want to be is your corporate bylaws. Thus, establishing a clear, well-defined rule set to establish your corporate identity and govern your business affairs should be considered a vital part of the initial incorporation process. Trusting in those bylaws will help ensure you place your company in the best position to enjoy all that a corporate status has to offer.
The content on our website is only meant to provide general information and is not legal advice. We make our best efforts to make sure the information is accurate, but we cannot guarantee it. Do not rely on the content as legal advice. For assistance with legal problems or for a legal inquiry please contact you attorney.