Mcbride_Charter_and_by-Law_Provisions

McBride Charters and By-Law Provisions University of Phoenix Corporate Governance MMPBL/570 March 13, 2011 McBride Charters and By-Law Provisions In order for an organization to become a legal corporation it needs to have a corporate charter approved by the state government. What is a corporate charter' It is defined as, “A written document filed with a U.S. state by the founders of a corporation detailing the major components of a company such as its objectives, its structure and its planned operations.” (Investopedia, 2011) The sole purpose of a charter is to establish legitimacy for one’s corporation. Each charter must have the physical name and address of the company that is filing it as well as the names and addresses of all other directors or individuals who will have any affiliation with the handling of any legal documents for the business. A corporate charter must state the purpose or reason for forming the corporation with some states allowing the charter just to state that the business is being formed to conduct lawful business activities. This allows the corporation to be allowed to participate in legal activities. The charter must also state the number of shares that they will be able to issue to current and or future investors. If the corporation is going to issue out multiple classes of stock it must list on the charter the types of stocks they are. The values per share of the stock which is decided upon by the directors of the corporation must also be listed in the charter along with the par or minimum value of each share. The charter must be filed with the secretary or department of state where the corporation will be located in order for it to be considered a legitimate corporation. Once a corporate charter or also known as an article of incorporation is filed it will become public domain, meaning, that anyone who is opening up a similar business or just wants to find out more about a certain business will be able to access that company’s charter through their secretary of state’s website. When forming a legitimate corporation filing a charter is the first thing that needs to be done in order for the corporation to be recognized as a fully operational one. Once the charter has been filed and accepted by the state and the corporation is now a fully recognized operational business, the board of directors will start creating the by-laws for the business. By-laws are defined as, “The official rules and regulations that govern a corporations management.” (eHow, 2011) In other words they are the rules and laws created by the board of directors for that specific corporation. Bylaws do not have to be filed with the state like the charters do but it is recommended that they should be filed and that copies of both the bylaws and the charter be kept in a safe place just in case of an audit. Bylaw provisions usually cover or should cover the breakdown of power possessed by the directors, officers and shareholders along with addressing how the meetings should take place and where they take place. Other areas the bylaws may cover is how the voting and elections are handled, who has the rights to be able to audit, write or revise the corporate books (accounting) and records. Most importantly the bylaws need to cover how the bylaws themselves can be updated and amended and who has the authority to do so. Every corporation can make up as many bylaw provisions as they deem necessary for their company but as soon as they are written up, they need to formally be adopted. “In some states, the incorporator has the power to do this, other states require the first board of directors to formally adopt them, and the remaining states leave both options open to a new corporation.” (Quizlaw, 2005-2011) It is very important that all corporations abide by state and government rules and before trying to open up a business they file a corporate charter as well as create any and all bylaws they deem necessary for their corporation and get them adopted and filed away in their corporate books. Abiding by these state and government business laws as well as amending and abiding by their own laws will not only allow them to be recognized as a fully legal and operational business but will also allow outside corporations, the public and possible potential shareholders or investors access to their company information which could then open up some potential growth opportunities. Most importantly it will strengthen their corporate governance structure and show that the corporation is a soundly built business from the inside out and will give no reason to outsiders why they wouldn’t be a great company to invest money or interest in. McBride Financial Services already has their corporate charter filed and approved and is now working on building their company up from the inside out. Hugh McBride needs to have bylaws created for his company and the only way for him to have them created is by hiring a board of directors to create the laws for him. Having these bylaws will protect his company from potential fraud and corruption as well as protect himself and his staff from any unethical acts that could arise. Hugh McBride does not have any laws or rules set down in his business because he will not relinquish any of his power. If Hugh wants to have a fully operational business that could go places and could open up doors to more potential investors, he needs to follow the rules and laws set up to operate a business and start building himself a corporate governance structure starting with hiring on a board of directors whom he will allow to create bylaws for his corporation and help run his company for him. He also needs to hire an accounting firm who will do right by his company and follow the rules when working with his company’s financial records. Most importantly creating bylaws within his corporation will also show his staff that he wants to run a legal and ethical business and that he is not willing to risk his company’s reputation or his staff’s jobs because he is on a power trip and refuses any help on making his company a great one. Hugh McBride has the opportunity to create an empire all he needs to do is take that first step and let go of his control over the company and start building himself a legally and ethically run corporation that plays by the rules of the corporate world. References eHow. (1999-2011). Constitution & Bylaws Definition. Retrieved from http://www.ehow.com/facts_5945877_constitution-bylaws-definition.html Investopedia. (2011). Corporate Charter. Retrieved from http://www.investopedia.com/terms/c/corporatecharter.asp  Quizlaw. (2005-2011). What are bylaws'. Retrieved from http://www.quizlaw.com/business_law/what_are_bylaws.php