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. The following guide provides helpful explanations of the more common resolutions your business may encounter in its lifespan.
For-profit and nonprofit corporations must regularly use corporate resolutions in order to meet required formalities required by state law. Although LLCs are not required to use corporate resolutions, they are still recommended to do so in order to document actions taken and votes decided at member meetings. Banks, investors, and other parties that work with the company will often request or require that they see company resolutions in order to gain a transparent view of company decisions.
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.
Depending on the type of entity, resolutions are created by the shareholders, board of directors, members, or board of managers. Indicate which type of party will be creating this resolution.
Next, include the date that the resolution is being adopted by the company. Normally, this is the date that the meeting occurs. When a resolution is being passed by written consent, then the adoption date will be the date that the decision-makers finish providing their votes.
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.
When a company certifies a resolution, it means that an officer has affirmed that the resolution is correct as written and was validly adopted. Banks and other organizations often require certification in order to open accounts or transact business. Resolutions are commonly certified by the company secretary or chief executive officer.
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 you are not required to sign the resolution, it should still be formally adopted by passing a vote at a board meeting. Have the secretary or an authorized officer sign the Certificate of Corporate Resolution page. This formally confirms that the resolution was validly adopted.
After adopting your resolutions, store them in your corporate records book. These records should be kept in a safe location and made available for inspection by only authorized personnel. It is recommended that you also store electronic backup copies of all your corporate records, including:
Companies with one or more shareholders need a shareholder agreement to agree on the rules, duties, and responsibilities of the owners. This will help avoid many common disputes that are often disastrous or fatal for companies. For instance, it states the rules for what will happen when a shareholder dies or wants to sell their shares. Clarifying these rules is essential for creating the transparency necessary to give shareholders confidence in the business venture.
Use meeting minutes to record the actions taken and resolutions made at a board meeting. This is a required corporate formality and important for all businesses, regardless of the entity type.
Before a board meeting, you will need to send out a notice of meeting to all parties eligible to participate. This provides the requisite formal notice for these parties, including the date, location, and other meeting details. If a participant does not receive a notice of meeting before the meeting, they must sign a waiver of notice, consenting to the meeting despite the lack of notice.
Finally, complete a stock certificate if any stock was issued to a shareholder at the board meeting and record the transfer in a stock transfer ledger. Store these documents with the corporate records.