Startups · Entrepreneurship

What are the bylaws really for?

Nick Cruz CEO at Nick Software Solutions

October 3rd, 2016

Just got a project up and running with a few friends. I have always asked myself why we need the bylaws for. Appreciate the insights.

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Arthur Lipper Chairman of British Far East Holdings Ltd.

October 3rd, 2016

The jurisdictions of incorporation (probably U,.S. states) will require your defining the relationship between there parties owning shares of the corporation. As with most contracts you should enter into them thinking of how your Executor will deal with the other parties to the contract in the event of your demise. Arthur

Tom DiClemente Management Consulting | Interim CEO/COO | Coach

October 3rd, 2016

Your FB page says you're in Chennai. I'm not sure these comments will apply to India.

In the US, for corporations, not LLCs, most states require that you have a set of bylaws and in fact provide the format. The bylaws of a corporation state the operating rules for the corporation and define the duties, responsibilities and rights of the officers and directors. It does not name them and, in the US, the bylaws have nothing to do with the relationship among the shareholders except for how they may call meetings, how they vote, etc. - it's a process oriented document.

Shareholder Agreements state the relationship among shareholder, the rights associated with each class of shares, and limitations with respect to ownership. Shareholder agreements are a good idea to have but they have not been required in any state that I have incorporated in.

LLCs have an operating agreement which is a combination of the shareholder agreement and a set of bylaws. They are required in all states of the US with which I am familiar.

I'm not sure which is your situation but hope that is helpful.  Tom