The Whys of By-Laws
In recent years, it has become increasingly convenient for individuals to set up their own corporations in Indiana. The availability of form Articles of Incorporation on the Secretary of State’s website and the ease of online filing have enabled many individuals to set up corporations on their own without the traditional approach of using an attorney. However, when individuals take a “do-it-yourself” approach to setting up their own corporation, they will often neglect to create By-Laws.
By-Laws are a document adopted by the corporation that the corporation will use as a “roadmap” for how it conducts its business. By-Laws can range from the very simple to the very complex, but usually cover such basic information as election and authority of officers, when and how meetings will be held, voting rights for owners, and similar items. Because By-Laws are not filed with the Indiana Secretary of State, individuals often think they are not necessary. In addition, form By-Laws are not available from the Indiana Secretary of State, compounding the incorrect perception that they are not needed.
Regardless of perception, Indiana’s business corporations law states that the incorporators or directors “shall” adopt By-Laws. Thus, under Indiana law, By-Laws are required. Further, the shareholders and directors of the corporation should want to have By-Laws in place in order to help them preserve corporate formalities and further assure their shield from personal liability. Shareholders and directors should also want to have By-Laws in place to head off any disputes that may arise regarding the governance of the corporation. Corporations that do not current have By-Laws in place should take steps now to comply with Indiana law and adopt By-Laws that the corporation will follow.