Key Takeaways

  • An LLC company resolution for banking is a formal document authorizing members or managers to act on behalf of the company in financial matters.
  • A banking resolution is often required by financial institutions to open an account or secure a loan.
  • The document must include specific details like authorized signatories, purpose, and meeting records.
  • LLCs may use templates provided by banks or draft their own, ensuring they include all necessary compliance language.
  • Resolutions may need to be updated when there's a change in management or banking relationships.

A board resolution for borrowing money from a bank is necessary for a company to go into debt. If this resolution is not passed, the company will not be able to borrow money.

Borrowing Resolution

Before a company can go into debt by borrowing from a bank, the shareholders of the company must provide officers the authority to borrow. Generally, lenders will give borrowers a standard resolution that they will fill out and then sign. This resolution will indicate that a meeting of the company's board of directors has taken place and that there was a vote allowing the company to go into debt.

Purpose of a Borrowing Resolution

A borrowing resolution serves to formally document that an LLC or corporation’s board or members have agreed to borrow money, ensuring there is internal authorization and external accountability. This document acts as proof for financial institutions that the company’s leadership has approved the loan and designated specific individuals to execute the loan documents. Without this resolution, banks may reject loan applications due to the lack of verified internal consent.

Information About Banking Resolutions

When a corporation's board of directors or a limited liability company's (LLC) members first meet to establish the organization, they will vote on a resolution related to the entity's banking details. There can be a wide range of resolutions discussed during this meeting, but the banking resolution is one of the most important.

After the initial discussion, adoption of the banking resolution can occur at a later meeting. The board of directors or LLC members also have the ability to alter the resolution if necessary. The purpose of drafting and adopting a banking resolution document is to outline the relationship LLC members or a corporation's directors will have with the company's banking needs. This document will also define responsibilities and privileges related to company banking. Once drafted, the banking document must receive authentication, meaning it should receive a corporate seal stamp and the corporate secretary's signature.

This document will list which people in the company may perform banking tasks, including:

  • Signing checks.
  • Borrowing money.
  • Making important banking decisions.

In addition to outlining banking responsibilities, this document will describe the time and place where the board of directors adopted the resolution. When changes to a banking document are necessary, these alterations need approval and the signature of the corporate secretary and the LLC members or corporate directors. Although you should check the rules in your state, you will usually not need to file this resolution with either your state government or your registered agent.

Once the borrowing resolution has passed, the document goes to the bank providing the loan. The company should also keep a copy of the document internally. Generally, when a corporation or LLC needs to pass a resolution, the best option is using a template, which should be easy to fill out. If your company undergoes any major changes, and you have already filed a banking resolution with a bank, you should alert the bank about these changes.

There are certain circumstances in which a bank will request that you pass and submit a brand-new banking resolution. For instance, if there is a change in your board of directors or company officers, or if your company needs to renew its loan, you will likely need to adopt a new banking resolution and then file this new resolution with your bank.

Many companies prepare their banking resolution before requesting a loan from their bank. In some cases, however, banks prefer you to fill out a standard form provided by the bank instead of using your own baking resolution.

Every bank will have its own procedures for accepting banking resolutions. Ask your lender directly to make sure that you are filling out and filing this document correctly. When applying for your company loan, the bank will keep a copy of your banking resolution. The bank will also usually keep copies of your company's important documents, including your Certificate of Incorporation and company bylaws.

Common Uses of an LLC Company Resolution for Banking

An LLC company resolution for banking may be used in a variety of scenarios beyond borrowing money, including:

  • Opening and managing business bank accounts
  • Authorizing wire transfers and online banking access
  • Setting banking transaction limits for individuals
  • Closing accounts or transferring funds
  • Establishing credit or applying for business credit cards
  • Adding or removing authorized signatories

Each of these scenarios requires a clear and enforceable record of who is authorized to act and under what circumstances.

Board Resolution for a Bank Loan

A company's Board of Directors must pass a resolution if the company needs to apply for a bank loan. In addition to approving this loan, the resolution may also approve mortgaging the company property if the loan requires some form of collateral. Although there can be some minor differences in borrowing resolutions from company to company, they will generally follow a standard format, making it easier for your company's directors to draft and adopt this resolution.

Templates and Best Practices

Using a standardized template can simplify the process of creating a borrowing or banking resolution. Templates are often available from:

  • Law firms or legal service providers
  • Online business formation platforms
  • Banks (which may require use of their specific form)
  • Registered agent services

Best Practices:

  • Double-check the legal names and titles of all individuals listed.
  • Use consistent language that aligns with your LLC's operating agreement.
  • Retain copies for both internal records and bank use.
  • Update the resolution whenever there are changes in management or authority.

Templates reduce the risk of missing key elements and ensure compliance with standard banking requirements.

What to Include in a Resolution Document

A well-drafted LLC company resolution for banking should include the following components:

  • Legal name of the LLC
  • Date and location of the meeting where the resolution was passed
  • Statement of authority authorizing specific persons to act on behalf of the company
  • Details of the banking activity (e.g., loan amount, bank name, account type)
  • Signatures of members or managers, including the corporate secretary if applicable
  • Optional: Notarization or seal of the company

Including these elements helps ensure that the resolution will be accepted by most banks and provides a transparent record for internal governance.

Frequently Asked Questions

  1. Do all LLCs need a banking resolution to borrow money or open accounts?
    Not all, but most financial institutions require one to verify who is authorized to act on behalf of the LLC.
  2. Can a single-member LLC use a banking resolution?
    Yes. Even for single-member LLCs, having a resolution can provide formal documentation of authority, especially when dealing with third parties.
  3. What happens if we don’t update the resolution after a management change?
    Banks may refuse to recognize the new authorized individuals, potentially disrupting banking access or delaying transactions.
  4. Is notarization of the resolution necessary?
    While not always legally required, some banks may request notarization for additional verification, especially with high-value loans.
  5. Where should the resolution be stored?
    Keep one copy internally with your company records and submit another to the bank as part of your loan or account application.

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