How to Amend Corporation Bylaws
Many small family businesses choose to incorporate or form a limited liability company (LLC) in order to protect their assets and owners from possible liability and claims.
Every corporation or LLC must have a) its original or amended articles of incorporation, b) the company’s bylaws, and c) minutes of every meeting held.
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When a company or share of a company is sold, it becomes necessary to file an amendment to the articles that were submitted with the original business incorporation. The articles of organization include basic identifying information about the business — the name, a registered agent, office address, list of owners and their respective shares, and any tax-exempt filings if applicable. The amendment must be filed with the Secretary of State’s office, and a filing fee paid.
The process for amending bylaws, however, differs from that for amending articles of incorporation.
How Bylaws Differ from Articles of Incorporation
Bylaws are basically a set of rules for the owners, managing partners and appointed managers. Bylaws will put forth the procedures for holding meetings and appointing officers. The bylaws will also describe the duties and responsibilities of managers and directors. The rules may also govern how long a director can serve on the board, and how many members are required for a quorum or vote. Bylaws may also reiterate any applicable state laws that govern corporations and LLC’s.
When information is changed in the corporation’s bylaws, the directors and shareholders must hold a vote before the rule is changed. Normally, a majority of the company’s shareholders must agree to changes in the bylaws. Although corporations must pay a filing fee to the secretary of state when amending articles of incorporation, there is no fee for amending company bylaws.
The Process for Amending Bylaws
First, establish a bylaws committee to discuss the proposed changes to the organization bylaws. Next, draft the proposed changes and have an attorney review them to assure that the language is clear and to avoid potential conflicts within the existing bylaws. In a small family business, the new bylaw amendments will be ready at this point to attach to the existing bylaws. In a larger corporation, the next step will be to present the proposed changes to the board, and after review by the board, to the full membership. The board does not necessarily have to approve the proposed changes before they are presented to the membership. The final step will be a vote to accept the proposed changes.
The final and accepted amendments to the bylaws should be retained with the incorporation records as a separate, dated document. The organization’s meeting minutes should also state the date of the amendment and the number of votes that passed it.
In some states, although no fee is required for amending bylaws, it may still be necessary to submit the amendment to the Secretary of State, but in others it is acceptable to simply include any amended bylaws with the corporation or LLC records.
