Bylaws Vs. Articles of Incorporation

Bylaws and articles of incorporation are a corporation’s official documents for organizing, governing and operating. Incorporation is a legal process governed by the state. The bylaws set forth the internal operating rules the corporation must follow and detail the roles of board members and officers. The articles of incorporation create and organize the corporation. The bylaws and articles of incorporation have similarities, but the primary differences make both documents necessary for creating the corporation's legal structure.

The corporation creates its bylaws before or after filing its articles of incorporation, depending on the state in which the business is located or the preference of the incorporator and directors. The bylaws often are created by an incorporator who filed or will file the articles of incorporation. Some corporations seat a board before creating the bylaws, so the directors or shareholders can approve the document.

The bylaws contain the corporation’s name, principal place of business and the policies, procedures and operating standards under which the business will operate. The bylaws include authorizations for the number of directors and officers, issuance of shares and stock, recordkeeping and meeting procedures. Also included are the requirements for amending the corporation’s bylaws and articles of incorporation.

The articles of incorporation, also called the articles of association or charters, depending on the state and legal structure of the business, include certain provisions that are required by state corporation law. The document includes the name of the incorporator, corporation name, names and addresses of initial directors and the signatures of the incorporators and directors.

The document must also include the corporation’s purpose, principal office location, the registered agent and the types and amount of stock the corporation is authorized to issue. The incorporator creates and files the articles of incorporation with the assistance and approval of the initial directors.

Although all states require corporations to create and approve bylaws, and some even require certain content, none require corporations to file the document with a government agency. All states require corporations to file the articles of incorporation with the government agency responsible for enforcing corporation laws, however.

After filing the articles of incorporation, which become public record, the state official will return the approved document and provide the incorporator with a certificate of corporation that includes the date of incorporation.

Nonprofit organizations use bylaws and articles of incorporation for the same purposes as for-profit corporations. Like any corporation, the bylaws provide the nonprofit’s operating rules, such as officer election and length of tenure, voting procedures and hiring practices.

However, nonprofits must include and comply with certain provisions in the documents to keep the tax-exempt status granted by the Internal Revenue Service. The nonprofit articles of incorporation must state the organization’s charitable purpose, as defined by the IRS. The document also includes a “dissolution clause,” which is required by the IRS for tax-exempt status. The clause states that in the event the nonprofit ceases to operate, it will dispose of its assets in a manner that does not benefit any individual.