Guide to Resolutions for Corporations and LLCs (With Examples)

A corporate resolution is a written document that memorializes a business’s decisions. Without resolutions, third parties (like banks) might not do business with your corporation or LLC. Plus, carefully keeping resolutions helps protect business owners from personal liability.

Who Signs Corporate Resolutions?

Corporate resolutions are signed by the key decision-makers in a corporation or LLC.

In a corporation, resolutions are often signed by the board of directors. The board, which is elected by the shareholders, exercises broad management powers over the corporation. In some cases, a corporation’s shareholders might also execute resolutions.

In an LLC, resolutions might be signed by the board of managers, which is similar to a corporation’s board of directors. The equity owners of LLCs, called members, also sometimes sign resolutions.

When Are Resolutions Necessary?

Corporations and LLCs should draft resolutions whenever they make important decisions. The rules are slightly different for corporations (where the rules are largely based on state law) and LLCs (where the LLC’s operating agreement typically controls). Let’s take a look.

Corporations

As a general rule, a corporation needs shareholder resolutions only for major corporate actions. Examples include:

Amending the corporation’s organizational documents
Entering into a merger or sale of the company
Adopting or amending an equity incentive plan
Dissolving the corporation

On the other hand, a corporation’s board of directors should create resolutions for a broader range of decisions, including:

Electing officers, such as the CEO, CFO, and Secretary
Borrowing or lending large amounts of money
Opening a bank account
Entering into major transactions
Declaring distributions to shareholders
Changing the corporation’s business plan
Opening a new office
Starting or settling litigation matters
Issuing securities

LLCs

In an LLC, the party signing the resolutions depends on the LLC’s structure.

In a member-managed LLC, the members control the business’s management without a board of managers. As a result, the members write resolutions for all major corporate decisions (including those that would be signed by the shareholders or the board of a corporation listed above). If you have a sole member LLC without managers, the sole member is the only party that signs resolutions.

In a manager-managed LLC, the LLC is managed by designated managers. An LLC’s operating agreement determines the decision-making power of the board of managers.

In some cases, the split of power between managers and members might be similar to the division of power between a corporation’s shareholders and board of directors. However, an operating agreement could give very limited power to the managers, reserving the right to make decisions regarding distributions or litigation to the members.

In practice, business owners and attorneys should review an LLC’s operating agreement to determine whether the power to make a certain decision rests with the members or managers. Then, the responsible parties should sign a resolution memorializing their decision.

For more on this topic, check out my article on LLC operating agreements.

Why Do Corporations and LLCs Need Resolutions?

Corporations and LLCs should draft resolutions for three main reasons:

Third parties require resolutions. If you form a new LLC or corporation, banks will often require resolutions authorizing certain individuals (like the CEO or CFO) to open bank accounts. If your business sells equity in a Series A financing, the venture capital fund will ask for resolutions authorizing the sale. In general, sophisticated third parties want to ensure that individuals acting on behalf of the business were properly authorized in resolutions.
Resolutions help preserve limited liability. One of the best reasons to form a corporation or LLC is to protect a business’s owners from personal liability. However, if you don’t treat your company as a legitimate business, a court might pierce the corporate veil and ignore limited liability protection. Drafting resolutions helps show a court you’re taking corporate formalities seriously and recognize the separation between your personal life and your business.
Resolutions preserve the corporate record. By diligently drafting resolutions, you’ll create a clear record of your business’s history. If you aren’t sure when you appointed the CFO, issued preferred stock, or settled a major lawsuit, you can look back in your resolutions for evidence of your decisions.

What Should Resolutions Include?

Resolutions should include the following provisions:

Name: Name of the business and the jurisdiction of formation.
Date: Date the resolution is effective.
Background: “Whereas” clauses giving background and showing the intention of the party writing the resolutions.
Decisions: “Resolved” statements describing the decisions being made.
Signature: Signatures of each of the parties making the corporate decision.
Exhibits: If an agreement is referenced in the body of the resolutions, the agreement should be attached to the end of the document as an exhibit.

What Do Resolutions Look Like?

Businesses don’t typically post their resolutions for the world to see. However, luckily for us, public companies do often need to make their resolutions publicly available.

Here’s an example set of resolutions appointing a corporation’s Chief Financial Officer.

Here’s an example set of resolutions approving a new equity incentive plan to issue stock options and other incentives to employees and other services providers. These resolutions are helpful to review because they provide an example where the resolutions refer to an agreement attached as an exhibit.

Your resolutions don’t need to look super fancy. Just be sure to include all of the required information and provide as much detail as is necessary to clearly give the background and reasoning of each major corporate decision.

Need Help Drafting Resolutions?

If you aren’t sure you want to draft your own resolutions, contacting an attorney is always a good idea. Business lawyers draft resolutions all the time, for everything from approving complex mergers to issuing equity. If you have any questions, feel free to reach out!