Key Takeaways

  • S corp bylaws outline how the corporation operates, detailing shareholder, director, and officer roles.
  • They help establish corporate legitimacy, meet legal requirements, and prevent disputes.
  • A well-prepared S corp bylaws sample includes meeting procedures, officer duties, voting rules, stock issuance details, and amendment processes.
  • Banks, investors, and regulatory bodies often require a copy of bylaws before doing business.
  • Bylaws can be tailored to suit the company’s management style and industry needs, while staying compliant with state laws.

Sample bylaws for an S corp can be used to create corporation bylaws or company bylaws. These are used by a corporation to organize management by providing rules and duties that apply to shareholders, directors, and officers. 

Definition of Corporation Bylaws

Corporation bylaws keep a corporation running smoothly by providing internal regulations and instituting the rules and operation of the business. As a result of the corporation bylaws' requirements, LLCs have become small business owners' ideal choice of business type. 

S Corporation Bylaws

When incorporating a company as an S corporation, owners must complete and submit the following to the applicable state agency:

  • Application
  • Articles of Incorporation
  • S corporation bylaws stating how the company will be operated

S corporations allow shareholders to report business income and losses on their individual tax returns. For this reason, many owners choose this form of entity for their business.

Key Legal Requirements for S Corp Bylaws

While S corporations have flexibility in creating bylaws, they must comply with state corporate statutes and the IRS rules for S corp eligibility. Typical legal requirements include:

  • Adherence to Articles of Incorporation – Bylaws cannot contradict the corporation’s filed articles.
  • Shareholder Limitations – The bylaws should reflect the S corp restriction of 100 shareholders or fewer, all of whom must be eligible individuals or certain trusts/estates.
  • One Class of Stock – Voting rights can vary, but economic rights must be the same for all shares.
  • Annual Meeting Mandates – Most states require at least one yearly shareholder meeting; bylaws should specify when and how it occurs.
  • Recordkeeping Compliance – Bylaws may set procedures for maintaining corporate records to satisfy both state law and IRS substantiation requirements.

Importance of Bylaws

Small business owners, particularly those with few shareholders, are often doubtful of the necessity of providing bylaws. However, bylaws assist in establishing a company as a corporation; therefore, it is crucial that business owners treat the creation of bylaws seriously. A company's operation is directed through the institution of bylaws, and they can assist in guiding a corporation toward successful growth and bypassing future problems. 

Besides these internal considerations, banks and other businesses may request a copy of a company's bylaws before considering doing business with that company. 

Practical Benefits of a Strong S Corp Bylaws Sample

A detailed bylaws document not only meets legal requirements but also:

  • Prevents Disputes – Clear rules on voting, officer roles, and decision-making help avoid conflicts among shareholders and directors.
  • Attracts Investors – Potential investors or lenders often view strong bylaws as a sign of stability and good governance.
  • Supports IRS Status – Accurate bylaws help demonstrate that the corporation operates in line with S corp formalities, protecting its tax status.
  • Guides New Leaders – Future officers and directors can rely on bylaws to understand the company’s operating framework without ambiguity.

Examples of S Corporation Bylaws

Here are some typical examples of S corporation bylaws:

  • Yearly meetings will be held to elect a board of directors for the following year.
  • To vote or carry on other transactional business, there must be a minimum of six directors.
  • A president, chief financial officer, vice president, and chief executive officer will comprise the corporate officers.
  • In the event that a corporate officer neglects their duties, shareholders can remove them by a majority vote. 

What to Include in Bylaws

Bylaws should provide certain parameters for a corporation, such as the following:

There is other information that may be included in the bylaws:

  • Location and regularity of board meetings
  • Principles concerning the rights of the shareholders and the reports they receive
  • Instructions regarding the removal and election of officers
  • Guidelines concerning officer payment
  • Conditions of stock offerings and certification
  • Specifics regarding the editing and annulment of current bylaws and the adoption of new bylaws

Additional Clauses to Consider in S Corp Bylaws

Beyond the standard sections, corporations may benefit from adding:

  • Conflict of Interest Policies – Clarifies expectations for officers and directors to avoid self-dealing.
  • Succession Planning – Outlines what happens if key officers leave or are unable to serve.
  • Dividend Policy – Specifies how and when profits will be distributed, in line with S corp tax rules.
  • Dispute Resolution Methods – Allows mediation or arbitration before litigation, saving costs and time.
  • Digital Meeting Provisions – Permits online voting and meetings, ensuring compliance in remote operations.

Who Needs Corporate Bylaws?

Bylaws are needed by corporations to assist in forming their organization. The incorporators write the bylaws, and by doing so, they provide regulations for meetings, voting rights, and the assignment of each individual's control and duties. 

Terms Used in Corporate Bylaws

Here are some typical terms that may be used:

  • Special Meeting: an impromptu meeting for urgent decisions
  • Quorum: the minimum number of shareholders that must be present in order to make decisions and conduct business
  • Voting Trust: a shareholder designates a trustee to control his shares and vote based on the trust agreement
  • Cumulative Voting: a voting system that allows each shareholder one vote per share multiplied by the number of directors being elected
  • Remote Communication: meetings that take place using telecommunication

Decisions That Should Be Considered in Corporate Bylaws

Included in corporate bylaws are many decisions concerning the shareholders, directors, and officers. Information in a company's bylaws may contain the following:

  • Notice requirement for calling special meetings
  • Whether meetings may be held remotely
  • The number of votes needed to create a quorum, whether shareholders can develop voting trusts, and whether cumulative voting is permitted
  • Whether the company will use a simple or intricate management structure
  • How many directors there will be
  • Whether the company is allowed to loan money to its officers, directors, or employees
  • The person in charge of appointing the officers

When Do Corporate Bylaws Become Effective?

The bylaws are typically accepted by the directors at their first meeting. The rules and guidelines provided in the bylaws will be in effect throughout the company's life or until a change is needed.

Can Corporate Bylaws Be Amended?

Since the needs of a business, corporate protocols, and laws can change over time, corporate bylaws may require occasional revisions. These can be made through a vote of the shareholders and directors.

Maintaining and Reviewing S Corp Bylaws

It is best practice to review bylaws annually or when significant business changes occur, such as:

  • Adding new shareholders
  • Expanding into new states
  • Changing the management structure
  • Merging with or acquiring another business

Regular updates ensure that bylaws remain compliant with evolving state corporate laws and IRS rules for S corporations.

Frequently Asked Questions

1. Are bylaws required for an S corporation?

Yes. While not always filed with the state, bylaws are legally required in most states and essential for proper corporate governance.

2. Can I use a generic bylaws template for my S corp?

You can start with a template, but it should be customized to meet your state’s requirements and your corporation’s specific needs.

3. How often should S corp bylaws be updated?

At least annually, or whenever major corporate changes occur.

4. What happens if an S corp has no bylaws?

Without bylaws, disputes are harder to resolve, corporate status may be challenged, and lenders or investors may be unwilling to proceed.

5. Do bylaws need to be notarized?

Generally, no. Bylaws are adopted and amended internally, but keeping signed copies with corporate records is recommended.

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