Bylaws and articles of incorporation are both important documents relating to a corporate business. Though similar, the two are distinct in form, features and function. One way to think about the difference it to liken it to the difference between the Constitution and individual laws. The articles of incorporation, like the Constitution, provide the broad framework of a corporation and its government. The bylaws are individual statutes that address much more specific issues in greater detail, but must be consistent with the articles.
Overview of Articles of Incorporation and Bylaws
The articles of incorporation are dominated with very general details of a corporation. They must state the legal name of the business, name a registered agent who can receive service of process and state the general purpose of the business. They must also describe the types and number of shares issued.
The bylaws are much more detailed. They spell out when and how shareholders meetings are to be conducted, the procedure for selecting and removing directors and officers, the process for paying dividends and how to amend the bylaws.
Individual Business Functions
The bylaws and articles of incorporation serve entirely different purposes. The articles of incorporation are the founding documents of a corporation. Like a constitution, they are the documents that bring the corporation into existence. The bylaws are the internal laws of the corporation. They take effect once the corporation is created, and control how the corporate governance is to operate. In practical terms, the bylaws will have a greater influence on the day-to-day functioning of corporate governance.
State Filing Requirements
As the founding documents of a corporation, the articles of incorporation must be filed with the state in which the business is incorporated. Most states do not require bylaws to be filed with the state. Bylaws have no effect outside the corporation, but can be introduced into a lawsuit to demonstrate corporate governance was or was not consistent with the applicable bylaws.
State Content Regulations
The exact requirements for articles of incorporation and bylaws are determined by the laws of the state in which a business is incorporated. Though the form and content is generally the same, there are differences. Some states, for example, require certain language to be inserted verbatim into the articles. Thus, it's important to check your state's laws before drafting either articles of incorporation or bylaws. Usually the secretary of state's website has details on these requirements.
Creating Articles of Incorporation and Bylaws
Articles of incorporation and bylaws are such common documents that it's not necessary to hire an attorney to create them. It's not difficult to find a variety of incorporation kits in retail stores and online to help with the process. There are even websites that will automatically generate the documents based on your answers to interview-style questions. Even these products are not strictly necessary since there are free forms available online. Most states have intentionally made the process of drafting these documents as easy as possible and usually offer state-specific forms or guidelines free of charge.
Joseph Nicholson is an independent analyst whose publishing achievements include a cover feature for "Futures Magazine" and a recurring column in the monthly newsletter of a private mint. He received a Bachelor of Arts in English from the University of Florida and is currently attending law school in San Francisco.