Articles of incorporation and by-laws: Overview, definition, and example
What are Articles of Incorporation and By-Laws?
Articles of incorporation are legal documents filed with the government to officially create a corporation. These documents include basic information about the company, such as its name, purpose, location, and the number of shares it can issue. The Articles of Incorporation mark the formal establishment of a corporation and are required for it to operate legally.
By-laws are the internal rules and regulations that govern the day-to-day operations of a corporation. They outline the responsibilities and powers of the company’s board of directors, shareholders, and officers. By-Laws typically cover topics such as the number of board members, how meetings are conducted, how decisions are made, and how officers are elected.
Why are Articles of Incorporation and By-Laws important?
Both the articles of incorporation and by-laws are important for the legal structure and smooth operation of a corporation.
- Articles of Incorporation are necessary to legally create a corporation, providing the formal recognition needed to conduct business, enter into contracts, and engage in other legal activities.
- By-Laws are critical because they provide a clear structure for how the corporation will operate internally. They help prevent disputes by setting out rules for governance and decision-making, ensuring that the corporation is run efficiently and in compliance with legal requirements.
For a business, having well-drafted Articles of Incorporation and By-Laws can help establish credibility, avoid legal issues, and create a clear framework for governance and operations.
Understanding Articles of Incorporation and By-Laws through an example
Imagine a group of entrepreneurs wants to start a software company. They file the Articles of Incorporation with the relevant government authority, providing details about the company’s name, purpose, and share structure. This filing officially creates the corporation.
Then, the group drafts By-Laws that govern how their company will operate. The By-Laws outline how often board meetings will be held, the roles of officers (e.g., CEO, CFO), and how decisions will be made, such as how shareholders vote on major issues or how directors are elected.
The By-Laws ensure that everyone in the company knows the rules for governance and operations, which reduces confusion and potential conflicts.
Example of Articles of Incorporation and By-Laws clause
Here’s how an articles of incorporation and by-laws clause might look in a corporate document:
“The Articles of Incorporation of [Company Name] have been filed with the Secretary of State in accordance with applicable laws. The By-Laws of the corporation, which govern the internal management and operations of the company, shall be adopted by the Board of Directors at the first official meeting and may be amended from time to time as deemed necessary by the shareholders.”
Conclusion
Articles of incorporation and by-laws are foundational documents that are essential for the formation and governance of a corporation. The articles of incorporation legally establish the company, while the By-Laws provide the structure and rules for how the company will operate on a daily basis. Together, these documents ensure that a company is legally compliant and can run smoothly, providing clarity and preventing internal conflicts.
This article contains general legal information and does not contain legal advice. Cobrief is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.