Corporate Resolution LLC: How It Works and Why It’s Important

While not always required, Corporate Resolutions are valuable because they indicate that the actions were taken by, and on behalf of, the corporation.

What Is a Corporate Resolution LLC?

A corporate resolution LLC is a legal document that outlines the decisions and actions taken by an LLC’s members or managers. It is a formal record of the LLC’s internal affairs, including key decisions, resolutions, and transactions.

The document highlights important decisions made by the LLC, such as appointing officers or managers, issuing shares or ownership interests, adopting bylaws or operating agreements, and approving major business transactions.

It is also used to authorize the LLC to take certain actions, such as entering into contracts or borrowing money.

Several key elements make up a corporate resolution LLC. These include:

• The name of the LLC and the date of the resolution.
• The names of all members or managers who are signing the resolution.
• The decision or action being authorized by the resolution.
• The terms and conditions of the resolution.
• The effective date of the resolution.

Essential Components of A Corporate Resolution

Corporate resolutions vary depending on the specific needs and requirements of each company. But a comprehensive resolution should include the following essential components:

• Heading: Your heading should indicate the name of your LLC and the members who made the resolution.
• Title: The title of your corporate resolution should outline its purpose and indicate whether it was adopted at a meeting or as a written resolution. 
• State & Date: Your resolution should specify when and where it was created. It’s also advisable to note all your meetings regarding the proposed resolution. Make sure each meeting date is correct to avoid confusion.
• Recitals: Recitals explain the primary purpose of the resolution, giving context as to how and why it was created. Generally, recitals start with the word “whereas.”
• Resolutions: Your resolution should detail the actions your LLC members plan on taking to achieve your decisions. 
• Votes: To promote transparency, note each LLC member’s vote on the resolution and specify which of them voted for and against the decision.
• Consent: This provision signifies that all members have consented to the resolution and must include the members’ signatures as mentioned above.

Why Is It Important?

Corporate resolutions play several roles in the decision-making process of a company, such as:

Legal Compliance

By documenting critical decisions and actions, the LLC can demonstrate that it has followed all legal requirements, such as those outlined in its operating agreement, state laws, or federal regulations.

Internal Governance

The document helps ensure that the LLC’s members or managers follow proper procedures and make informed decisions that align with the company’s goals.

Liability Protection

Should any legal disputes arise, your LLC’s corporate resolution can be used as evidence to show that the company acted in good faith and followed proper procedures.

Financing and Investment

Banks and other investors may require LLCs to provide corporate resolution as part of the due diligence process to ensure that they have proper governance structures.

Who Needs to Use Corporate Resolutions?

Despite what most people think, corporate resolutions are not limited to corporations and their boards of directors. Multi-member LLCs can also use them to document their members’ and managers’ decisions. 

Below, we’ve listed the different actions and business decisions you can document on your corporate resolution:

• Approval and introduction of new members and officers. 
• Acceptance of new bylaws.
• Creation of a corporate bank account. 
• Designating members and officers who can access the corporate bank account. 
• Changes in the managerial department. 
• Changes in salaries or bonuses, including any alterations to health benefits or retirement plans. 
• Approval of the selling of shares. 
• Buying or selling corporate real estate. 
• Expansion of the business.
• Major financial decisions like taking out loans. 
• Approval of a new trademark. 

Types of Corporate Resolutions

There are five common types of corporate resolutions LLCs can use:

• Organizational Resolutions establish the company’s structure, bylaws, and other foundational aspects.
• Financial Resolutions: These resolutions deal with financial matters, such as approving budgets, borrowing money, or issuing stock.
• Banking Resolutions: These resolutions indicate which LLC members have the authority to conduct financial transactions on behalf of the company. Some banks require companies to provide them with a banking resolution before they can open an account or sign off on any transaction. 
• Operational Resolutions: These resolutions address the company’s day-to-day management of the company, like hiring employees, entering into contracts, or purchasing equipment.
• Legal Resolutions: These resolutions cover legal matters, such as settling disputes, creating partnerships, or forming subsidiaries.
• Strategic Resolutions: These resolutions deal with the company’s long-term goals and direction, such as entering new markets, developing new products, or acquiring other companies.

Corporate Resolutions vs. Articles of Incorporation

Corporate resolutions are very different from articles of incorporation. Articles of incorporation are the legal documents filed with the Secretary of the State to formally establish an LLC or a corporation. 

They outline essential information about your business, such as its registered name, formation date, and business structure. 

Meanwhile, corporate resolutions document the business decisions and actions made by the LLC’s members. Unlike articles of incorporation, you don’t have to file your LLC’s corporate resolutions to any government agency. 

They are considered internal documents prepared and maintained by the LLC.

How to Write A Corporate Resolution For Your LLC

Forming a corporate resolution LLC is fairly straightforward. Here are the steps:

Identify the Decision

The first step in creating a corporate resolution for your LLC is to identify the decision that needs to be made. This decision can be related to any aspect of the business, such as hiring a new employee, purchasing new equipment, or entering into a partnership agreement.

Draft the Resolution

Once the decision has been identified, the next step is to draft the resolution. The resolution should state the decision and any necessary implementation details or conditions. It should also include the names of the members or managers who are authorized to sign the resolution.

Vote on the Resolution

After the resolution has been drafted, it must be presented to all members or managers for a vote. Depending on the LLC’s operating agreement, a certain percentage of votes may be required for the resolution to pass. The resolution may be voted on during a meeting or through written consent.

Record the Resolution

Recording the minutes of the LLC’s meeting or in a written consent document ensures a record of the member’s or managers’ decisions. The minutes of the meeting should include:

• The meeting date or written consent.
• The names of those present.
• A clear description of the adopted resolution.

Communicate the Decision

After the resolution has been adopted, communicate the decision to all members and relevant parties. This can be done through a written notice or meeting to discuss the decision and its implications.

Passing A Resolution

Proposing a resolution is relatively easy, but the true challenge lies in getting it approved. 

Typically, a resolution will only be approved if it gets the majority vote of all LLC members. However, some companies have their own regulations on voting procedures. For instance, they may require a specific percentage of votes for different categories of resolutions. 

Most corporations categorize their resolutions into two: ordinary and special. Ordinary resolutions are used for formal decisions that require a 50% voting majority. They are typically proposed and voted on during general meetings but can also be passed in writing.

On the other hand, special resolutions are decisions made on critical business matters. These decisions are integral to the operations of the LLC, meaning they require a higher percentage of votes. 

You’ll need at least 75% of all members’ votes to approve a special resolution. That said, we recommend reviewing your LLC’s operating agreement so you can note the guidelines you must follow and ensure a better chance of approval.

Common Mistakes to Avoid

When writing and implementing your LLC’s corporate resolutions, be mindful of making these three common mistakes:

Ambiguity

Ambiguity is one of the most common mistakes companies make when creating corporate resolutions. You’ll want to avoid using vague language and statements, which can cause more misunderstandings and confusion among your members. 

Remember, your resolution will only be valid if they approve it. So, it’s best to be clear about your intentions and what you hope to achieve in this decision.

Make sure that your resolution is clear and concise. Don’t forget to provide context when needed. This way, they can make a more informed decision on the matter. 

You can also illustrate your resolution with concrete examples or specific details. This approach will help you avoid misinterpretation, which often happens in large organizations. 

Clarity is the key to avoiding disputes and costly lawsuits.

Lack of Authorization

As mentioned earlier, certain resolutions require a specific number of approvals for them to be valid. 

If a corporate resolution is enacted without proper authorization, it will be considered invalid. Moreover, it could expose you and the rest of your company to lawsuits and other similar legal risks.

To prevent this, consult your LLC’s operating agreement and follow the voting procedures indicated in the document.

Failure to Maintain Good Record-keeping Practices

Proper record-keeping is crucial for ensuring the validity of corporate resolutions. It serves as formal documentation of the decisions and actions made by the LLC members and prevents potential disputes from arising in the future. 

Once your corporate resolution is approved, we recommend you keep it in a secure and easily accessible location. This way, you can easily retrieve it during audits. 

Creating multiple copies of the resolution is also advisable, so you won’t have to worry about losing or damaging the original document. For an extra layer of security, you can create digital copies of the resolution.

By maintaining good record-keeping practices, you can protect the integrity of your resolutions and promote transparency in your operations.

Finalizing & Implementing Your LLC’s Corporate Resolutions

Once the resolution has been approved, you must finalize and implement it properly. 

Below are a few tips on how to ensure smooth implementation of your LLC’s resolution:

Review & Edit

Before you implement the decision, we suggest reviewing the document one last time to ensure accuracy. Look for any errors or inconsistencies in your resolution and correct them. 

You must ensure that your resolution reflects your intentions and complies with your LLC’s regulatory requirements.

Designate Executors

Once you implement the decision, designate a member or manager to execute the resolution’s directives. This will ensure accountability and make the implementation process much smoother. 

Create A Timeline

If your resolution involves a series of steps or actions, we recommend you create a timeline outlining the deadlines for each task. The timeline will help keep everyone involved on track and ensure that the resolution is implemented promptly. 

However, it would be best to stay realistic about your expectations. Depending on its nature, several factors could affect the timeline of your resolution. So, consider potential delays instead of creating a strict schedule and adjust it accordingly.

Monitor Your Progress

Once you implement the resolution, monitor its progress and hold regular check-in meetings to address any necessary challenges or adjustments. 

It would also be a great idea to keep other LLC members updated on the implementation of the resolution. Consider compiling periodic progress reports to inform all members of significant developments.

Get Help from Business Formation Experts

Need help creating a comprehensive corporate resolution for your LLC? Look no further than NCH.

NCH is one of Nevada’s leading business formation service providers. We are committed to providing premier business formation services and support to help you create and grow your company. 

Although there are plenty of corporate resolution templates online, we understand that no LLC is the same. Each business has unique needs and wants that require a more customized approach. 

Our experts will help you draft and file legal and strategic resolutions and provide guidance and resources to help you achieve your business goals. We will ensure your corporate resolution aligns with your state’s regulations and LLC’s bylaws. 

Contact us today to learn more about how we can assist you in creating a comprehensive corporate resolution for your growing LLC. Call 1-800-508-1729 or email us at [email protected] to book your consultation!