If you`re starting a small business and have decided to structure it as an S corporation, one of the crucial steps you`ll need to take is creating an S corp operating agreement. This document outlines the rules and procedures for how your business will operate and can help you avoid conflicts and legal disputes down the line.
To give you an idea of what an S corp operating agreement might look like, let`s take a look at an example. Keep in mind that every business is unique, so your operating agreement will need to be tailored to your specific circumstances and needs.
Introduction
The document should begin with an introduction that includes the name of the business, the state in which it is registered, and the date the agreement was created. It should also include a brief statement of the purpose of the agreement.
Membership
The next section of the operating agreement should outline who the members of the S corp are and what their roles and responsibilities are. This section should also specify how membership can be transferred or terminated.
Management
The management section should detail how the business will be managed. This includes how decisions will be made, who will be responsible for day-to-day operations, and how any disputes will be resolved.
Capital Contributions
The agreement should outline the capital contributions made by each member, including any assets, cash, or property. It should also specify if additional contributions will be required and how they will be determined.
Distributions
The distribution section spells out how profits and losses will be distributed among the members. It should also outline how distributions will be made, including the frequency and method of payment.
Meetings
The operating agreement should include a section that outlines how and when meetings will be held, including the notice requirements and quorum rules.
Amendments
Finally, the agreement should specify how it can be amended and under what circumstances. Any changes to the agreement should be made in writing and signed by all members.
Conclusion
Creating an S corp operating agreement is an essential step in ensuring the success and smooth operation of your business. While the example provided here is just a starting point, it can help you understand the types of provisions that should be included in your agreement. Be sure to consult with a legal professional to ensure your agreement is comprehensive and meets all legal requirements.
