Use a corporate resolution (called a "company resolution" for an LLC) to formally record the important binding decisions of a corporation's directors, officers, managers, or owners. A good corporate resolution is customizable to anticipate any resolutions the business's decision-makers may pass. Below are some helpful explanations of the more common resolutions your business may encounter in its lifespan.
A corporate resolution is a necessary business document for corporations, both for-profit and nonprofit. However, resolutions for LLCs are not absolutely necessary. An LLC may adopt the forms and procedures of a corporation and use company resolutions to document and evidence its decisions in a more formal manner. This will be helpful for banks considering providing financing to the LLC or for the LLC's investors to obtain a transparent understanding of the company.
Enter the business's name exactly as it appears on your articles of incorporation or articles of organization filed, or to be filed, with the state.
A resolution can be made by the shareholders, board of directors, members, or board of managers depending on the entity type. Select the decision-maker for this resolution as appropriate for your business.
Depending on your rules and procedures as outlined in the articles of incorporation, shareholders' agreement, corporate bylaws, or LLC operating agreement, the decision-maker establishing this resolution may have several methods of passing a resolution. Select the option that describes how these resolutions are being adopted.
Enter the date that this corporate resolution is adopted by the decision-makers. If the resolution was passed at a meeting that meets quorum, then the adoption date is probably the meeting date, unless otherwise specified. If the resolution was passed by written consent, then the adoption date may need to anticipate the time lapse that may occur until a sufficient number of necessary decision-makers have signed and returned their consent to pass a resolution.
A company's foundational documents often require a high standard of approval by the company's ultimate decision-makers before these documents can be changed or amended. To make changes to the bylaws, charter, shareholder agreement, or operating agreement, select the appropriate document to be amended and write out the specific section to be changed, replaced, or eliminated.
One of the most common decisions that requires a resolution is the annual budget approval. Here, the decision-makers review the company financials from the previous year and approve the estimated budget for the coming year. To complete this section, insert the start and end date of your company's fiscal year.
Additionally, it is important to remember that the approved budget plan should be attached to the resolution and filed with the company records.
When borrowing capital, the banks frequently require proof that the company authorizes the loan. A resolution from the company stating consent to borrow capital with certain dollar and collateral limits will satisfy the bank that the company and their officers or representatives have the authority to engage the bank and seek out a loan.
This resolution authorizes the company's officers to either 1) start a new lawsuit against a third party that has wronged the company, or 2) defend an existing lawsuit from a third party alleging that the company committed certain wrongdoings. The resolution should include some general terms to reference the nature of the legal dispute and the parties involved. The resolution also gives the president or chief executive officer the authority to reasonably settle the dispute.
(For-Profit Corporations Only)
To declare a dividend distribution to its shareholders, the corporation only needs to provide the distribution type, the dollar amount per share, and the classes of shares affected by this resolution. The corporation should also establish a "record date," which is the cut-off date to determine the shareholders eligible to receive the dividend distribution.
Use this resolution to appoint directors, officers, and managers to their respective positions within the company. These new appointments will begin immediately until their successors are elected, they resign voluntarily, or they are removed from the position by the company.
This resolution allows the company officers to engage in the hiring of a specific employee and sets the parameters of the employment offer. The officers cannot hire an employee for more than the resolution's maximum dollar limit. The employee will receive whatever standard benefits are offered to other employees unless otherwise noted in this section.
For larger ticket items, a company and its financiers will often require the decision-makers to authorize the expenditure before the lease or purchase is made. This section identifies these leases or purchases in order to specifically authorize the officers to procure these items. Additionally, it is important to remember that the lease or purchase agreement, if available, should be attached to the resolution and filed with the company records.
This resolution authorizes the company officers to enter into negotiations with a third party. A resolution is usually reserved for large or long-term contracts. It is not necessary for the officers to gain approval from the company decision-makers for smaller negotiations that the company may encounter on a daily basis.
This resolution authorizes the company officers to pursue all licenses or government approvals that are specified here. This can also serve as verification to third parties that the company authorizes all actions relating to the procurement of these licenses and approvals.
Nearly every business will need a bank account, and this resolution concisely enables the chief financial officer to authorize opening a bank account with a reputable bank for the company's sole use and benefit.
This resolution allows the decision-makers to authorize any prior acts or decisions made by people who report to the decision-makers. For example, this resolution allows the shareholders to ratify acts done by the board of directors and any officers after careful consideration of the directors' and officers' actions and decisions.
This resolution authorizes the company to hire a specialist at a reasonable market rate as approved by the chief financial officer. These specialists may include accountants, brokers, attorneys, consultants, and more.
This resolution identifies assets the company wishes to sell and the intended buyer. It is important to remember that the sales agreement, if available, should be attached to the resolution and filed with the company records.
This resolution formally approves the termination of a specific contract, employee, officer, director, or lease. The termination may occur immediately or on a specified date.
This resolution allows you to add any additional resolution passed by the company, if applicable.
A certified company resolution is a resolution that has been approved and confirmed to be true and accurate by one or more company authorities, such as the secretary, president, or other officers. A certified company resolution is useful if a bank or other external organization ever requires verification to permit specific actions or powers.
As you complete your corporate resolution, you will need to provide certain relevant information. This includes all resolutions that have or will be passed at a shareholders' or board of directors' meeting.
Use the information you collected to complete the corporate resolution. We make this easy by guiding you each step of the way and helping you to customize your document to match your specific needs. The questions and information we present to you dynamically change depending on your answers and the state selected.
It is always important to read your document thoroughly to ensure it matches your needs and is free of errors and omissions. After completing the questionnaire, you can make textual changes to your document by downloading it in Microsoft Word. If no changes are needed, you can simply download the PDF version and sign. These downloads are available by navigating to the Documents section of your account dashboard.
While there is no need to sign the corporate resolution, it needs to be formally adopted at a board meeting. The secretary or other authorized officer should sign the Certificate of Corporate Resolution confirming and recording that the board of directors adopted the bylaws for official use.
Once your resolutions have been adopted, you should store your approved corporate resolutions in your corporate records book. Be sure that you store your records in a safe location. It is a good idea to keep both physical and electronic copies. The following documents should be stored in your corporate records book:
Every company with more than one shareholder should have a shareholder agreement to ensure that all shareholders are treated fairly and are aware of each other's management authority as well as rights, duties, and responsibilities toward the corporation and toward each other. Shareholder agreements work in conjunction with your articles of incorporation but provide many important additional protections. Despite your good intentions, it is all too common for conflicts to arise down the road when no agreement is in place. What happens with the shares when one shareholder dies or when shareholders want to sell their shares? These and a multitude of other potential issues can be cleanly resolved and clarified by having a shareholder agreement securely in place.
Your company will also need to use meeting minutes to document its board meetings. Board of directors' or shareholders' meetings are where fundamental decisions about the corporation are made. For example, this is where the bylaws are formally adopted; officers may be appointed; tax selection of the corporation may be approved; directions may be given to directors or officers; and authority to open bank accounts, enter into contracts, or incur other expenses may be approved. Any corporate resolutions passed at the first meeting must be recorded in a corporate resolution form.
Prior to board meetings, a notice of meeting should be sent to all parties attending. If no notice for the meeting was given, a waiver of notice should be signed at the meeting. The meeting details must be documented by a party designated as the meeting secretary in the meeting minutes.
Lastly, if a resolution to issue stock was passed at the first meeting, you will need a stock certificate to formally issue the stocks and a stock transfer ledger to record the transactions for corporate records.