Shareholder and operating agreements is one of the most important building blocks when creating your business. Deciding how to conduct your affairs and who has the responsibility is crucial when it comes to the challenges and decisions your company faces.
A shareholder agreement is a legal contract between shareholders, which outlines the rights and obligations of the shareholders and the corporation. This agreement also defines the process for resolving any disputes or issues that may arise between shareholders or with the corporation.
The shareholder agreement typically includes provisions related to the transfer of shares, voting rights, the appointment of directors, the issuance of new shares, and the distribution of dividends. The agreement may also outline the terms of any loans made to the corporation by shareholders, as well as any restrictions on the corporation’s ability to issue additional shares or take on additional debt.
An operating agreement is similar to a shareholder agreement, but it is used for limited liability companies (LLCs) instead of corporations. This agreement outlines the responsibilities of the members of the LLC and provides guidance on how the LLC will operate. The operating agreement typically covers topics such as member contributions, profit distribution, decision-making procedures, and the process for adding or removing members.
Having well-drafted shareholder and operating agreements in place can help to prevent disputes and misunderstandings between business owners. These agreements provide a clear framework for decision-making and establish rules for resolving conflicts that may arise. By addressing potential issues such as member death or expulsion in advance, these agreements can help to ensure the long-term stability and success of the business.
Like our partnership agreements, we make sure the business has an outlined agreement detailing the relationships and structure of the ownership in order to answer questions such as “what if there is a death of a member”, “the process of expelling a member”, etc.
Guerrero Law can help facilitate operating agreements by:
- Providing legal advice and guidance on the terms and conditions to include in the agreement.
- Drafting the agreement to ensure it is legally binding and meets the needs of all parties involved.
- Negotiating and resolving disputes between parties over the terms of the agreement.
- Reviewing and updating the agreement to ensure it remains compliant with current laws.
