• In California, a corporation is a "legal entity distinct from its owners," meaning the owners, directors and officers of a corporation are not personally liable for corporate obligations and acts, with some limited exceptions. However, certain state laws and requirements still apply to corporations in California. For example, California state law requires all corporations adopt bylaws that lay out the governance of the corporation.
  
  

Bylaw Requirements

• The California Corporations Code and the California Business and Professions Code both require all corporations in California to adopt a set of bylaws after the corporation has been formed. Bylaws set forth how the corporation will govern itself and operate. For example, bylaws typically discuss when stockholders will have their meetings, how directors for the corporation will be elected, what kind of quorum is necessary to vote on an issue and if majority or some other ratio of votes determines the resolution, if and when proxy voting is allowed. In addition, bylaws are an internal document, so outsiders are not bound to the requirements and rules set forth in them.
  
  

Adopting, Amending and Repealing Bylaws

• Only shareholders of the corporation have the absolute power to adopt, amend or repeal corporate bylaws. However, the board of directors may adopt, amend or repeal bylaws if a bylaw previously adopted by the shareholders allowed the board of directors to do so.
  
  

Indemnification

• In California, a corporation's bylaws are permitted to offer indemnification to directors and officers of the corporation, provided the director or officer did not act dishonestly or in bad faith. Indemnification is a type of compensation. In corporate law terms, indemnification is a sum of money paid out to cover loss or injury.