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Bylaws for Start-Ups

As the founder of a business start-up, it can be so easy to get wrapped up in the excitement of kicking off your new business idea. The energy will be flowing and you will want to sprint forward as fast as possible. Before you launch yourself forward, make sure you have a firm foundation laid down for your business. A quality foundation will, after all, allow you to build the business you are dreaming of. Part of this foundation for your start-up should include things like bylaws. Let’s talk about why.

Bylaws for Start-Ups

Bylaws can prevent internal complications within your start-up allowing you to focus on sustainably building your business. This is true regardless of your company’s size. Your bylaws will provide the internal guidance everyone can look to in order to clearly see how the company should be managed and directed each and every day. Your board of directors will need to adopt your bylaws. Once this happens, the bylaws become legally binding.

On the birds eye view level, bylaws should detail the principles and guiding values of your start-up. The bylaws should detail how decisions are made in the business, the proper protocol for both shareholder and director action, and more. This is important for a number of reasons. For starters, not every founder of a start-up is going to have experience as a business professional. Having clear protocols in place for how the business will be managed and run can be invaluable in helping to ensure things run effectively and efficiently.

Bylaws are also critical for start-ups considering the fact that founders may start with similar visions and goals for the business, but may disagree on a number of fronts over the course of the business. Internal disputes, when not properly handled, can quickly signal the decline and end of what could otherwise be a solid business. Do not bank on the fact that you and your start-up co-founders seem on the same page now. Set down your bylaws and provide details on how disputes should be addressed and resolved. It will likely end up saving you a great deal of time, money, and headaches down the road.

It may also seem like you and your co-founders will be a part of the business forever. When things are just starting out, this is an easy trap to fall into. The likelihood is, however, that, at some point, a co-founder will want to leave the business. You should provide for this in your bylaws so that your business will be more likely to weather these storms.

There are also a few reasons why you should put your bylaws in place now, and not just for purposes of the benefits you will reap in the future. After all, your bylaws can be a critical corporate formality to observe. It will give your start-up credibility. It is something you can give to your outside investors. It is something you can use to get commercial loans or lines of credit for the business. Observing this corporate formality will also help solidify the corporate veil. The protection you receive from personal liability in business dealings. When businesses fail to observe such formalities, they risk a plaintiff being able to pierce the corporate veil and hold founders personally liable for monetary damages, among other things.

Business Law Attorneys

For help establishing quality bylaws to put your start-up on the path to success, talk to the team at Jones, Gregg, Creehan & Gerace. Contact us today.