How to Change the Nature of Business for a Corporation

By Jeff Clements

A corporation is an independent legal entity that is formed under state law and managed by a board of directors. Although it is usually formed to pursue a given business objective, it is ordinarily not limited to a specific business purpose and is free to enter various industries. Nonetheless, restrictions can be placed on a corporation, but they can be changed or removed later if necessary.

A corporation is an independent legal entity that is formed under state law and managed by a board of directors. Although it is usually formed to pursue a given business objective, it is ordinarily not limited to a specific business purpose and is free to enter various industries. Nonetheless, restrictions can be placed on a corporation, but they can be changed or removed later if necessary.

Corporate Formation

A corporation is formed by filing articles of incorporation with the state business authority. Most states allow corporations to be formed for any legal purpose and conduct any sort of business without specifying any limitation in their articles. However, the law does give incorporators the right to specify a specific business purpose, if the initial shareholders so desire. This is common for nonprofits that wish to obtain tax-exempt status as a recognized charity with the Internal Revenue Service or for institutions, such as banks, that may be required to have specific regulatory approval in their charter.

Ready to incorporate your business? Get Started Now

Articles of Incorporation

If such a limiting purpose is contained in the articles and the corporation wishes to change the nature of its business, the articles must be amended accordingly. Amending the articles requires reference to the corporation's bylaws and an authorizing vote, either by the board of directors or shareholders. Amended articles ordinarily must be filed with the state to take effect and once filed, become public record.

Corporate Bylaws

Another way to limit a corporation's business activities is to place the limitation in the corporation's bylaws. The bylaws govern the internal affairs of the corporation, including the nature of the business of the corporation. As with the articles of incorporation, corporate bylaws may be amended by the board of directors -- or shareholders, depending on the corporation -- to change or remove an existing limitation of purpose.

Amending Bylaws

If the limitation is in the bylaws, the bylaws must be amended. Amending the bylaws is an internal process that is governed by the procedures specified in the most recent version of the document. The bylaws typically allow amendment by a vote of the board of directors. Sometimes, bylaws will classify a change of the corporation's purpose as significant enough to require a majority vote of the shareholders of record.

Ready to incorporate your business? Get Started Now
How to Amend a Corporation

References

Resources

Related articles

Difference Between Amended & Restated Bylaws

Bylaws are rules adopted by an organization such as a corporation or association to govern how its business is conducted. In the case of associations, such as a condominium or housing association, the bylaws also set out rules for membership and consequences for violating those rules. As laws change and organizations grow, changes to the bylaws can be made. Depending on what type of change is required, these changes may be made either through restating or amending the bylaws.

Questions on Corporation Bylaws

A set of corporate bylaws is like a constitution for your corporation. Effective bylaws outline the structure of a corporation and how it is to be run. Any issue that is not covered in the corporation's bylaws will be governed by state law default rules: rules that apply only if bylaws don't cover the issue. Although you don't have to file bylaws with state authorities, the corporation must keep a copy in its records.

How to Remove an Officer From Articles of Incorporation

A corporation is organized under state law by filing articles of incorporation that specifically conform to the state's statutes. Most states make listing members of the board of directors in the articles optional or require only a listing of initial directors but not updates when the composition of the board changes. If a corporation chooses to list board members and wants the information to be current, it can change the names by amending the articles of incorporation.

LLCs, Corporations, Patents, Attorney Help

Related articles

How to Amend a Constitution & Bylaws of a Corporation

Corporations are independent legal business entities that operate subject to a series of rules. While corporations do ...

How to Design a C-Corporation Agreement

A C Corporation is the standard form of corporation and is the basis for all other corporate forms. While partnerships ...

How to Dissolve a Corporation Status in Wyoming

The process for dissolving a corporation is governed by state law. In Wyoming, this may be accomplished by a majority ...

How to Write an S Corp Operating Agreement

An S corporation is a qualifying corporation that has elected to be taxed under Subchapter S of the Internal Revenue ...

Browse by category