1. What Are Articles of Agreement?
2. Articles of Incorporation vs. Operating Agreement

Articles of agreement are the foundational documents of a business entity. With these documents, a business will outline members' voting rights, limitations of the company, and entity powers.

What Are Articles of Agreement?

When forming a business entity, you will need a wide range of documents, including articles of agreements. Articles of agreements are most commonly used by non-profit organizations, and they serve a very similar purpose to articles of incorporation.

There are several important pieces of information that should be included in articles of agreement:

  • Purpose of the entity.
  • A list of members.
  • A list of capital owned by the entity.
  • A description of how the entity will be managed and operated.
  • Amendments and provisions.

Typically, articles of agreement will be related to either personal estate or real estate. Articles are best understood as a part of an agreement and can either be a minute or a memorandum. Generally, an article will be in writing, and it will be used to modify or dispose of a piece of property. When used in relation to property, an article, or instrument, the agreement should cover a variety of information:

  • The identification of the involved parties.
  • The subject of the contract.
  • The terms to which the parties in the contract have agreed.
  • The effective date of the contract.
  • Signatures from all parties involved.

When covering the contract's subject matter, it is crucial that you use language that is easily understood by all. You will also need to list a specific time and location for the contract to be completed. For instance, if the contract is related to the delivery of goods, you would need to specify when and where they are to be delivered and which party is responsible for the delivery expense.

The agreement must also clearly state the responsibilities of each and every party of the contract. Failure to define the duties of the parties may make it difficult for them to uphold their obligation. The date of the instrument should be accurate. The signature of every party, or the signature of each party's agents, needs to be included.

If an agent's signature is used, the authority of the agent will need to be included. The agent should sign their client's name as well as their own. When a person plans to buy a piece of real estate, they will usually first pay a down payment, and then pay the rest of the money that they owe upon settlement.

In some cases, however, the buyer isn't able to cover the down payment, whether it's because they don't have the money or are unable to obtain a loan. Despite the lack of a down payment, the seller may still wish to sell their property to the buyer, and they can do so by using an installment sale agreement.

With an install sale agreement, a down payment will not be needed. Instead, the buyer would make a month's property payment in advance. After this initial payment, the buyer will make their normal monthly payments as outlined in the agreement. If there is a default, most install sale agreements can be converted to a lease, meaning the monthly payments will be treated as rent instead of payments towards ownership of the property.

Therefore, if a buyer misses a payment, which would count as a default, they could be evicted from the property. To gain ownership of the property's title, the buyer should make sure that they are making his required payments on time and in the proper amount.

In addition to having the ability to evict buyers for defaulting on the agreement, sellers may also have the right for sue the buyer for the money owed.

Articles of Incorporation vs. Operating Agreement

Depending on the structure of a corporation, the company may be required to create certain documents. The purpose of these legal documents is to describe information about the corporation. This information can include a description of how the corporation will be operated or the corporation's purpose. These documents are commonly referred to as articles of incorporation.

Operating agreements are similar to articles of incorporation but are used by limited liability companies instead of corporation. Both types of documents will be used in a similar manner, and will usually need to be filed with the state for the entity to be valid.

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