# Understanding Operating Agreements and Corporate Bylaws for S-Corps
An operating agreement outlines an LLC's financial and functional decisions including rules and provisions. S-corps use corporate bylaws and articles of incorporation instead of an operating agreement to organize their business operations.
Bylaws specify the number of directors, how they are elected, terms, qualifications, and conduct of board meetings and voting requirements. Articles of incorporation are required by all states to create an S-corp while bylaws are not required by every state.
## Benefits of an Operating Agreement
Creating a tailored operating agreement provides a framework for managing operations and responsibilities of an S-corp. It aids in avoiding management conflicts and misunderstandings by separating rights and obligations. It also protects an S-corp from state default rules and ensures that the owners' personal assets are protected from the company’s debts and obligations.
### FAQ: Operating Agreement Necessity and Implementation
**Do you need an operating agreement for an S corp?**
Corporations (S corps and C corps) are not legally required by any state to have an operating agreement, but experts advise owners of these businesses to create and execute their version of an operating agreement, called bylaws.
**How Does an S Corporation Operating Agreement Work?**
An S corp operating agreement ensures the business is run smoothly and makes its tax status clear. Despite being an important document, it does not need to be filed with the state but should be kept with the core records of your business.
**Does a California corporation need an operating agreement?**
Yes, a California LLC operating agreement is a required document to be executed by the owners of a company after formation. According to CA Corporations Code Section 17701.02(s), every California LLC is required to have an operating agreement.
## Key Takeaways
An S Corporation or S Subchapter is a type of legal entity that has specific characteristics required by the IRS to be considered an S Corp, such as not having more than 100 shareholders.
An operating agreement is critical for documenting important policies and rules and is considered the bible of how the business is supposed to operate.
In California, an operating agreement is not only legally required but also provides a clear framework for running your LLC and can be crucial in resolving future disputes.
Advisor