S Corporation Bylaws

[ross84]

Hi Everyone. I really hope you guys will help me or guide me to the right place for cheap guidance. I am trying to save every cent that I can. Here is my question.

I have an s corporation in Texas. I own 65% of shares and my partner owns 35% of shares. We are both on the board of directors. We have agreed that I control 100% of all financial actions. Thus he will not have signatory rights, can't open bank accounts under the corp, etc. How do I put the restriction of power under the bylaws? Also, how do I put each directors title under the bylaws? I already purchased an article of incorporation from rocketlawyer but it turns out that is all they do..

 

[tranquility]

Creation of bylaws is practicing law. Sorry.

 

[ross84]

Creation of bylaws is practicing law. Sorry.

Could you give me a sky view of how it works? If a loan request or an opening of a bank account is attempted, what type of documentation do they ask for?

Thanks

 

[latigo]

Hi Everyone. I really hope you guys will help me or guide me to the right place for cheap guidance. I am trying to save every cent that I can. Here is my question.

I have an s corporation in Texas. I own 65% of shares and my partner owns 35% of shares. We are both on the board of directors. We have agreed that I control 100% of all financial actions. Thus he will not have signatory rights, can't open bank accounts under the corp, etc. How do I put the restriction of power under the bylaws? Also, how do I put each directors title under the bylaws? I already purchased an article of incorporation from rocketlawyer but it turns out that is all they do..

1. In the first place corporate directors do not micro-manage the corporate business affairs. They elect corporate officers to perform those functions, who serve at the will of the board of directors.

And those corporate offices are not filled by the corporate bylaws. The office holders are nominated and elected by the board of directors, which must be documented in the corporate minutes.

2. A "Director" has but one title as such and that is "D-I-R-E-C-T-0-R"!

3. You wouldn't necessary want to restrict a particular officer or officers from performing certain financial transactions. It would be better to secure those functions exclusively within the purview of the corporate president.

But here you have a larger problem, which has to do with your design to provide for only two (2) corporate directors – (you and the 35% mentally retarded investor.)

Since each director is going to have one vote – (not cumulative as with a stockholder) how do you propose to ensure yourself as being president of the company with exclusive control over the purse strings, if the two of you lock horns?!

4. Why haven’t you considered structuring this enterprise under Title 3 of the Texas Business Organization Code, like a much less complex Limited Liability Company?

5. As little as you know about what you are doing (nothing it seems) it is most unlikely that you will be accomplishing what you intend to accomplish – especially shielding your personal assets from business debts. Which requires more than just boiler platting and staring at your computer screen.

Lastly, whether you think so or not it is past due for you to spend some money with a business law attorney.

 

[tranquility]

Could you give me a sky view of how it works? If a loan request or an opening of a bank account is attempted, what type of documentation do they ask for?

Thanks

Art. 2.23. Bylaws

A. The initial bylaws of a corporation shall be adopted by its board
of directors.The bylaws may contain any provisions for the
regulation and management of the affairs of the corporation not
inconsistent with law or the articles of incorporation.

B. A corporation's board of directors may amend or repeal the
corporation's bylaws, or adopt new bylaws, unless:

(1) the articles of incorporation or this Act reserves the power
exclusively to the shareholders in whole or part; or

(2) the shareholders in amending, repealing, or adopting a
particular bylaw expressly provide that the board of directors may
not amend or repeal that bylaw.

C. Unless the articles of incorporation or a bylaw adopted by the
shareholders provides otherwise as to all or some portion of a
corporation's bylaws, a corporation's shareholders may amend,
repeal, or adopt the corporation's bylaws even though the bylaws
may also be amended, repealed, or adopted by its board of directors.

Acts 1955, 54th Leg., p. 239, ch. 64, eff. Sept. 6, 1955. Amended by
Acts 1973, 63rd Leg., p. 1494, ch. 545, Sec. 14, eff. Aug. 27, 1973;
Acts 1987, 70th Leg., ch. 93, Sec. 9, eff. Aug. 31, 1987.

Info edit:
Art. 2.42. Officers

A. The officers of a corporation shall consist of a president and a
secretary, each of whom shall be elected by the board of directors
at such time and in such manner as may be prescribed by the bylaws.
Such other officers, including assistant officers, and agents as
may be deemed necessary may be elected or appointed by the board of
directors or chosen in such other manner as may be prescribed by the
bylaws. Any two (2) or more offices may be held by the same person.

B. All officers and agents of the corporation, as between
themselves and the corporation, shall have such authority and
perform such duties in the management of the corporation as may be
provided in the bylaws, or as may be determined by resolution of the
board of directors not inconsistent with the bylaws.

C. In the discharge of any duty imposed or power conferred upon an
officer, of a corporation the officer may in good faith and ordinary
care rely on information, opinions, reports, or statements,
including financial statements and other financial data,
concerning the corporation or another person, that were prepared or
presented by:

(1) one or more other officers or employees of the corporation
including members of the board of directors; or

(2) legal counsel, public accountants, investment bankers, or other
persons as to matters the officer reasonably believes are within
the person's professional or expert competence.

An officer is not relying in good faith within the meaning of this
section if the officer has knowledge concerning the matter in
question that makes reliance otherwise permitted by this subsection
unwarranted.

Acts 1955, 54th Leg., p. 239, ch. 64, eff. Sept. 6, 1955. Amended by
Acts 1981, 67th Leg., p. 3114, ch. 818, Sec. 4, eff. Aug. 31, 1981;
Acts 1985, 69th Leg., ch. 128, Sec. 11, eff. May 20, 1985; Acts
1991, 72nd Leg., ch. 901, Sec. 17, eff. Aug. 26, 1991.

 

[ross84]

1. In the first place corporate directors do not micro-manage the corporate business affairs. They elect corporate officers to perform those functions, who serve at the will of the board of directors.

And those corporate offices are not filled by the corporate bylaws. The office holders are nominated and elected by the board of directors, which must be documented in the corporate minutes.

2. A "Director" has but one title as such and that is "D-I-R-E-C-T-0-R"!

3. You wouldn't necessary want to restrict a particular officer or officers from performing certain financial transactions. It would be better to secure those functions exclusively within the purview of the corporate president.

But here you have a larger problem, which has to do with your design to provide for only two (2) corporate directors � (you and the 35% mentally retarded investor.)

Since each director is going to have one vote � (not cumulative as with a stockholder) how do you propose to ensure yourself as being president of the company with exclusive control over the purse strings, if the two of you lock horns?!

4. Why haven�t you considered structuring this enterprise under Title 3 of the Texas Business Organization Code, like a much less complex Limited Liability Company?

5. As little as you know about what you are doing (nothing it seems) it is most unlikely that you will be accomplishing what you intend to accomplish � especially shielding your personal assets from business debts. Which requires more than just boiler platting and staring at your computer screen.

Lastly, whether you think so or not it is past due for you to spend some money with a business law attorney.

You are correct. I do not know jack about starting a corporation. Let me give you the back story so you don't think I'm a blood sucking idiot. Maybe, with your respect, you will be willing to help me a little more. I'm a chemical engineering student about to graduate with a PhD in about 6 months. Starting a business is not my expertise. I have had no experience with it but I am excited to learn. My "business partner" who is my brother has made some life mistakes and I am trying to help him pick up the pieces. Contrary to what it might seem, I am not jumping in the pile of **** with him, rather trying to pull him out. His strengths are selling. He can sell very very well. His weaknesses are anything financial. He does not have the financial control for anything. I am giving him 35% of the business simply because he is my brother. But before I invest a penny financially or credit wise I need to take him completely out of the financial equation.

As little as I know, I know that owning the majority of stocks means I have full control of the company. So I did this. Now I want to keep him as a director and as an officer of the corporation. Simply because I do not want him to have the feeling that he is working for me. He is my older brother. I know I can take full financial control of the company but I don't know how yet.

Could you give me a shove to the right direction. How do I make the bylaws? How do I incorporate it in the article of incorporation if that is already made? If he is an officer in the company, will a bank or credit card company or loan company as for bylaws before issuing him a request? Could you give me the steps to the right direction?

Your help will seriously help me avoid any catastrophic actions I might naively take. I plan on talking to a lawyer within the next few days but I want to know as much as I can now to get more from the consultation.

Thank you

 

[Zigner]

You are correct. I do not know jack about starting a corporation. Let me give you the back story so you don't think I'm a blood sucking idiot. Maybe, with your respect, you will be willing to help me a little more. I'm a chemical engineering student about to graduate with a PhD in about 6 months. Starting a business is not my expertise. I have had no experience with it but I am excited to learn. My "business partner" who is my brother has made some life mistakes and I am trying to help him pick up the pieces. Contrary to what it might seem, I am not jumping in the pile of **** with him, rather trying to pull him out. His strengths are selling. He can sell very very well. His weaknesses are anything financial. He does not have the financial control for anything. I am giving him 35% of the business simply because he is my brother. But before I invest a penny financially or credit wise I need to take him completely out of the financial equation.

As little as I know, I know that owning the majority of stocks means I have full control of the company. So I did this. Now I want to keep him as a director and as an officer of the corporation. Simply because I do not want him to have the feeling that he is working for me. He is my older brother. I know I can take full financial control of the company but I don't know how yet.

Could you give me a shove to the right direction. How do I make the bylaws? How do I incorporate it in the article of incorporation if that is already made? If he is an officer in the company, will a bank or credit card company or loan company as for bylaws before issuing him a request? Could you give me the steps to the right direction?

Your help will seriously help me avoid any catastrophic actions I might naively take. I plan on talking to a lawyer within the next few days but I want to know as much as I can now to get more from the consultation.

Thank you

Oh Good Lord!
This is even MORE reason to seek the advice of a professional. Not only do are you diving in to something that you have NO clue about, but you are doing it with (troubled) family.

 

[tranquility]

Stock holders vote for directors and directors vote for the officers and officers run the corporation.

Get an attorney.

Stock holders in a closely held company can't actively screw other stock holders. Directors have a fiduciary duty to stock holders and, when insolvent or near insolvent (sometimes), to creditors. Officers have a fiduciary duty to directors, and in some cases, stock holders and creditors.

 

[latigo]

. . . . . . . . but I want to know as much as I can now to get more from the consultation.

You'll get more from the “legal consultation” without any preconceived notions.

But let me end my part in this intriguing thread by asking you a question.

Would you consider subscribing to 35% of the capital stock of a corporation that is to be organized by someone as ignorant and inexperienced in the process as you and that individual being able to call all of the shots? Huh?

If you can truthfully answer that in the affirmative, then you are as loony as your investor.

 

[LdiJ]

You are correct. I do not know jack about starting a corporation. Let me give you the back story so you don't think I'm a blood sucking idiot. Maybe, with your respect, you will be willing to help me a little more. I'm a chemical engineering student about to graduate with a PhD in about 6 months. Starting a business is not my expertise. I have had no experience with it but I am excited to learn. My "business partner" who is my brother has made some life mistakes and I am trying to help him pick up the pieces. Contrary to what it might seem, I am not jumping in the pile of **** with him, rather trying to pull him out. His strengths are selling. He can sell very very well. His weaknesses are anything financial. He does not have the financial control for anything. I am giving him 35% of the business simply because he is my brother. But before I invest a penny financially or credit wise I need to take him completely out of the financial equation.

As little as I know, I know that owning the majority of stocks means I have full control of the company. So I did this. Now I want to keep him as a director and as an officer of the corporation. Simply because I do not want him to have the feeling that he is working for me. He is my older brother. I know I can take full financial control of the company but I don't know how yet.

Could you give me a shove to the right direction. How do I make the bylaws? How do I incorporate it in the article of incorporation if that is already made? If he is an officer in the company, will a bank or credit card company or loan company as for bylaws before issuing him a request? Could you give me the steps to the right direction?

Your help will seriously help me avoid any catastrophic actions I might naively take. I plan on talking to a lawyer within the next few days but I want to know as much as I can now to get more from the consultation.

Thank you

Based on this post you absolutely need an attorney and you need to explain to the attorney very thoroughly what you want to accomplish. Going into business with family is always problematic and needs to be very well controlled and organized from the very start.

 

[ross84]

You'll get more from the “legal consultation” without any preconceived notions.

But let me end my part in this intriguing thread by asking you a question.

Would you consider subscribing to 35% of the capital stock of a corporation that is to be organized by someone as ignorant and inexperienced in the process as you and that individual being able to call all of the shots? Huh?

If you can truthfully answer that in the affirmative, then you are as loony as your investor.

I came here with my ego in check. I did not expect the result to be short handed insults.

Recognizing ones ignorance and taking the correct actions to learn is a character strength. The intelligence required to acquire a PhD in chemical engineering far surpasses that of law school. Let me be clear, I am not saying all doctorates in chemical engineering are smarter than all lawyers. In result, I am more than capable of learning the legal aspects of this business.

**** this forum.

Peace

 

[TheGeekess]

I came here with my ego in check. I did not expect the result to be short handed insults.

Recognizing ones ignorance and taking the correct actions to learn is a character strength. The intelligence required to acquire a PhD in chemical engineering far surpasses that of law school. Let me be clear, I am not saying all doctorates in chemical engineering are smarter than all lawyers. In result, I am more than capable of learning the legal aspects of this business.

**** this forum.

Peace

Alrighty then.

 

[davew128]

The intelligence required to acquire a PhD in chemical engineering far surpasses that of law school.

But not compared to those who received advanced degrees in taxation...and that PhD didn't teach you any humility, which makes you pretty much on par with most attorneys I know.