Bylaws act as an organization’s governing rules, and they are appropriate for many types of organizations, including corporations and nonprofits. For example, a corporation’s bylaws could determine how the corporate voting process works and how many members sit on the organization’s board. Bylaws rarely have to meet a certain format, but there are some topics bylaws commonly address.
State laws regarding bylaws vary, and your state’s laws may not describe the exact contents of an organization’s bylaws. This allows an organization to adapt bylaws that work well for that organization. For example, nonprofit corporations need bylaws that address how the nonprofit plans to dispose of its assets if it dissolves, and these procedures likely differ from those a for-profit corporation might choose. Though organizations typically do not have to file their bylaws with the state, they may do so to make them a public record. State law may require an organization to keep its bylaws on file at the corporation’s main office.
Generally, bylaws can be in any format and can contain any terms allowed under state law. Many states allow bylaws to contain anything that isn’t illegal. For example, Kansas law allows corporate bylaws to contain any topic related to the corporation’s business, the conduct of its affairs, or the rights and powers of the company and its stockholders, directors, officers and employees. However, California law provides specific direction for what bylaws must contain in addition to a list of optional contents. Typically, bylaws contain a description of the responsibilities of corporate officers, the number of directors that sit on the organization’s board, how board and shareholder meetings are conducted, the authority of each leader of the company and termination provisions when the corporation decides to dissolve.
Bylaws are not set in stone, and the contents and format can be changed periodically as needed. Often, it is a good idea for an organization to look at its bylaws periodically to keep them relevant to the organization’s current operations. Bylaws themselves typically contain provisions describing how they can be amended, but this often can be in any way that works for the organization. For example, an organization’s bylaws could state they can only be changed by a two-thirds vote of the board of directors, or they could authorize a change by a majority vote of the shareholders.
Lack of Bylaws
If your organization intends to register for nonprofit status, you must have bylaws. But, even if you do not intend to register as a nonprofit, you could be violating your state’s laws by not having bylaws. Even if your state does not require bylaws, your organization lacks basic operating guidelines when you do not have bylaws. This could mean your company’s operations are controlled by state law rather than a customized set of bylaws that fits your company’s unique needs.