This post is part of a series designed to help you register a high-impact startup. Here, we focus on governing documents specific to the US, although equivalents are common in other jurisdictions.
What are governing documents?
Governing documents establish key components of governance within the organization. You may be required to submit your governing documents, along with certain certificates, when you register with your state — which we’ll cover in a future post.
Governing documents by business structure
The type of governing documents you’ll need depend on your organization’s legal structure.
Sole proprietorship
No governing documents required.
Partnership
Requires a partnership agreement, establishing the rights, responsibilities, and obligations of the partners in a partnership. This should include:
- Roles and responsibilities of each partner
- Distribution of profits and losses
- Procedures for resolving disputes
See a template partnership agreement here.
When it comes time to register your partnership with the state department, you’ll also need a certificate of partnership. This simple document describes the basics of your limited liability partnership. It notifies the state of the partnership’s existence and contains basic business information like the company name, address, and partner names. Not all states require it, and some states call it by a different name.
Corporation
Any corporation requires the following two governing documents:
- Articles of Incorporation are used to legally establish a corporation. See template Articles of Incorporation here. (Articles of Incorporation are often called “Articles of Association” outside the US.)
- Bylaws are a nonprofit organization’s internal operating rules or organizational manual. hey serve as guidance for the board members of a nonprofit. Bylaws aim to establish membership structure, procedures for holding elections and organizing meetings, and other operations. There’s no specific language required by the IRS, although you should check your state for any additional requirements. Your bylaws must establish the following:
- The number of annual meetings
- Minimum and maximum numbers of board members
- Your organization’s charitable purpose
- Your organization’s officers.
Typically, bylaws will also establish:
- How directors are chosen or hired
- Director roles
- Director term limits
- Scope of powers of the board
- Processes around board vacancies
- Processes around the removal of a board member.
We generally recommend engaging a lawyer to review your bylaws once established.
Unlike the articles of incorporation, which are public and must be filed with the secretary of state, your corporation’s bylaws constitute a private, internal document that doesn’t have to be filed with a state or government entity.
If you intend to distribute shares, we strongly recommend creating a shareholders agreement to establish the rights and obligations of the shareholders in a corporation. This applies to all corporation types except a nonprofit, which does not issue shares. See a template shareholders agreement here.
LLC
An LLC requires two governing documents:
- Articles of Organization are used to create an LLC’s legal status, and includes basic information such as the LLC’s name, address, and the names of its members. See template Articles of Organization here. (Articles of Organization are sometimes called a “Certificate of Formation”.)
- An operating agreement provides the governance and operational rules for an LLC. See a template operating agreement here.
Cooperative
A cooperative requires a cooperative agreement.
Next steps
Get your governing documents reviewed by a solicitor. Then, file them when you register your organization.
In addition to the required governing documents and certificates, an optional document you might create is a co-founders agreement. This document establishes guidelines for decision-making, intellectual property ownership, and conflict resolution among co-founders. It can apply to any pair or group of co-founders interested in setting expectations and holding each other accountable in their joint venture. See a template co-founders agreement here.
Stay tuned for our next post: Incorporate your organization.