Why do I need corporate bylaws?
Unlike your California Articles of Incorporation, California corporate bylaws are not filed with the Secretary of State. However, they are legally recognized and no less important than any public document. Here’s why:
1. Corporate bylaws establish the rules and rules within your corporation.
Having a blueprint for your corporation’s big picture situations and procedures will help prevent any disagreements that might disrupt the flow of operations. This is especially important given the fact that your corporate bylaws determine some of the most critical aspects of your corporation, like your board of directors, shareholders’ meetings, stocks and even record-keeping procedures.
2. Corporate bylaws prove that your business is a legitimate corporation.
Not only does having bylaws signals to others that you run a legitimate business—banks, land lords and potential investors will probably ask to see your bylaws before doing business with you. Plus, if you’re facing a lawsuit, your corporate bylaws will help reinforce your limited liability status.
Does California require corporate bylaws?
No. The California Corporations Code does not explicitly state that corporations must have corporate bylaws. However, the necessity of bylaws is implied in several places, including CA Corp Code § 213, which requires corporations to keep a copy of their bylaws on file at their principal executive office. There’s also the fact that if you don’t list the number of directors in your Articles of Incorporation, you’re legally required to list that information in your bylaws (see California Corp Code § 212). The bottom line: corporate bylaws are not legally required, but they’re pretty much essential for your corporation.
What is included in California corporate bylaws?
Corporate bylaws can include anything (within the law) not already covered by California’s statutes. But strong bylaws are essential, and should include information about:
- Meetings
- Stock
- Directors and officers
- Finances
- Records
- Amendments and emergencies
Who Prepares the bylaws?
Usually, the board of directors adopts bylaws during the first organizational meeting. While it’s a good idea to consult with a lawyer before finalizing your bylaws, you can use our free, California Corporate Bylaws template to help get you started.
Are corporate bylaws legally binding?
Yes. Your California corporate bylaws are official legal documents, which means you can use them in a court of law to prove your limited liability status or show how your corporation functions. It also means you could face legal consequences if you violate your bylaws.