The Importance of Bylaws When Incorporating Your Tech Startup

As a tech startup, incorporating your business is an important milestone that can come with a lot of stress and even more questions.

One question many tech startups often ask is, “If I’m not legally required to file bylaws, do I still need to do it?” The answer to this is yes.

In this article, we explain what it means to incorporate a startup and why your tech startup should file bylaws during the incorporation process.

What Does It Mean to Incorporate a Business?

Incorporation is a process that turns a business into a legal entity with all income and assets separate from its owners. The business then becomes known as a corporation. Incorporation often adds more structure and formality to a business.

While not a requirement for tech startups, incorporating a business offers numerous benefits, including:

• Ownership of the company can be shared by selling shares
• It’s easier to obtain financing
• Tax rates are lower
• Corporations are recognized globally
• Corporations have continuous existence (they live on forever unless dissolved)

What Is the Process of Incorporating a Startup?

In the state of Arizona, when incorporating a startup, you must do the following:

• Decide on the corporate structure
• Find out if your desired corporate name is available
• Appoint someone as your corporation’s registered agent
• File the articles of incorporation
• Abide by state publishing requirements
• Secure a federal employer identification number (EIN)

What Are Bylaws and Why Does My Tech Startup Need Them?

In the simplest of terms, bylaws are the rules and regulations that control how your startup is managed from day to day. This includes principles, framework, and policies that outline:

• The name of the business, its address, and its purpose
• The ownership rights its shareholders have
• How the corporation’s officers and directors will be removed when necessary
• Board meeting rules (how often they will be held, location of meetings, attendance requirements, etc.)
• Shareholder and board member voting rights
• Appointments to the board of directors
• Job descriptions and responsibilities of corporate directors

In the state of Arizona, it is not required for a business to file bylaws during the incorporation process. However, it is not recommended for tech startups to incorporate the business without having bylaws in place.

One reason for this is that once tech startups incorporate, there is so much room for growth and expansion, and it can be difficult to resolve conflicts and disputes when there aren’t clear bylaws.

Corporate bylaws are also crucial as they help your corporation appear more legitimate to the IRS, lenders, investors, and others with whom you may wish to do business.

The Importance of Working With a Corporate Law Attorney When Incorporating Your Startup

The process of incorporating a business is incredibly complex and requires a certain level of corporate law expertise that most entrepreneurs do not have. For this reason, when deciding to turn your Arizona tech startup into a corporation, it’s crucial that you seek out the services of a corporate law attorney with extensive experience in Arizona corporate law, specifically incorporating startups.

If you are looking to incorporate a tech startup in Arizona, consult a corporate law lawyer at RM Warner. RM Warner Law is a Scottsdale-based law firm whose team of corporate attorneys has helped hundreds of entrepreneurs throughout the US incorporate their businesses and navigate the challenges that come with this process.

Contact us today to get the incorporation process started.