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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.
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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.
