S Corporation Shareholder Agreement Template

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An S Corp Shareholder Agreement is a vital legal document that outlines the rights, responsibilities, and expectations of shareholders in a Subchapter S corporation. It serves as a roadmap for the company’s operations, ensuring transparency, accountability, and a harmonious working environment among stakeholders.

Essential Components of an S Corp Shareholder Agreement

1. Identification of Parties

Free Shareholder Agreement: Make & Download - Rocket Lawyer
Free Shareholder Agreement: Make & Download – Rocket Lawyer

Clearly state the names and addresses of all shareholders involved in the agreement.

  • Include the date the agreement is executed.

  • 2. Company Formation

    Specify the name of the S Corporation and its state of incorporation.

  • Detail the date of formation and the purpose of the company.

  • 3. Capitalization and Ownership

    Define the total authorized shares, the number of shares issued, and the ownership percentage of each shareholder.

  • Outline the types of shares (common, preferred) and their respective rights and privileges.

  • 4. Share Transfer Restrictions

    Establish rules governing the transfer of shares, including the right of first refusal and buy-back provisions.

  • Consider limitations on transfers to non-qualified individuals or entities.

  • 5. Management and Control

    Determine the structure of the company’s management, such as a board of directors or a management committee.

  • Specify the powers and responsibilities of each management body.
  • Establish procedures for decision-making and dispute resolution.

  • 6. Voting Rights

    Define the voting rights of each shareholder, including the number of votes per share and voting procedures.

  • Consider cumulative voting or weighted voting schemes.

  • 7. Dividend Policy

  • Outline the company’s dividend policy, including the factors determining dividend distributions and the allocation of profits among shareholders.
  • 8. Compensation and Benefits

  • Address the compensation and benefits of shareholders, including salaries, bonuses, and stock options.
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    9. Indemnification

  • Provide for the indemnification of shareholders against liabilities arising from their actions on behalf of the company.
  • 10. Dissolution and Liquidation

    Specify the procedures for dissolving the S Corporation and distributing its assets among shareholders.

  • Address the consequences of a shareholder’s death, disability, or bankruptcy.

  • 11. Amendments

  • Outline the process for amending the shareholder agreement, requiring a majority or supermajority vote.
  • 12. Governing Law and Dispute Resolution

    Specify the governing law of the agreement and the jurisdiction for resolving disputes.

  • Consider alternative dispute resolution mechanisms, such as mediation or arbitration.

  • Key Design Elements for a Professional Template

    Clear and Concise Language: Use plain language that is easy to understand, avoiding legal jargon.

  • Consistent Formatting: Maintain consistent formatting throughout the document, using headings, bullet points, and numbering to improve readability.
  • Professional Layout: Choose a clean and professional layout that enhances the document’s appearance.
  • Attention to Detail: Ensure the document is free of errors and inconsistencies.
  • Legal Review: Consult with an attorney to ensure the agreement complies with applicable laws and regulations.

  • A well-crafted S Corp Shareholder Agreement provides a solid foundation for the company’s operations and protects the interests of its shareholders. By carefully considering the essential components and design elements, you can create a professional and effective document that fosters trust, collaboration, and long-term success.