LLC Resolution: Everything You Need to Know
An LLC resolution is a document describing an action taken by the managers or owners of a company, with a statement regarding the issue that needs to be voted on. 3 min read
2. Resolution Requirements
3. Keeping Documentation of LLC Decisions
An LLC resolution is a document describing an action taken by the managers or owners of a company, with a statement regarding the issue that needs to be voted on. This does not need to be a complicated document, and need only include necessary information. By state law, corporations are required to prepare these resolutions. These commonly involve shareholder and board of directors' actions. An LLC does not have to make resolutions, but there are times it could be useful:
- An LLC member makes a decision regarding the business's organization
- A member must establish their authority to open a bank account for the LLC
- Members must prove their authority to sign a loan on the LLC's behalf
- The LLC makes a decision to purchase real estate, and needs to document the property and sales price
One of the benefits to forming an LLC is that it's not required by state law to meet the same formal rules as a corporation. Written resolutions and meetings do not always need documentation, nor do regular meetings need to be held.
Articles of Organization
The articles of organization is an operating agreement stating the procedure for voting on an LLC's resolutions. Usually, a majority vote is required for passing a resolution. However, it is permissible to have other voting percentages. The operating agreement is used to document any changes LLC members make in the requirements needed for voting on issues. This document is filed with the secretary of state where the LLC was formed. It also lays down the rules for voting and the business's day-to-day operation.
Immediately after the articles of organization are filed with the secretary of state, an LLC has been fully vested with the authority to pass resolutions. This authority continues as long as the LLC is allowed to conduct business in the state where the articles of organization were filed.
All members of the LLC who vote in favor of a resolution usually are required to sign the document after it is passed. Members who vote against it do not need to sign. They are, however, still bound by its terms as long as they retain ownership of the LLC. If the LLC has an even number of voters, requiring a majority vote to pass a resolution may result in a deadlock. In this situation, it may be wise to adopt a different voting formula, such as allowing a lower percentage for passage.
An LLC is required by the state to keep important records on-site at its principal place of business; these may include its articles of organization and tax records. Depending on the state, an LLC may also need to keep a written statement of each member's contribution of capital and distribution of ownership. This can be covered with an LLC resolution.
According to state law, an LLC can either be managed by every member or by a manager the members designate. A nonmember can fill the role of manager. In this case, outside parties such as banks, other financial institutions, or government agencies need to know who is authorized to act on behalf of the LLC to sign contracts and conduct other business. An LLC resolution fulfills this requirement and communicates this information. Some of these outside parties may provide their own form of resolution the LLC must use.
Keeping Documentation of LLC Decisions
Another use for an LLC resolution is to keep written records of the members' important decisions. One of the most common situations for this is long-term leases or contracts that involve a considerable amount of financial risk. The LLC should create a resolution that documents the action itself, along with a record of the members' meeting and results of any vote that took place. In this way, future disputes may be avoided.
Many preformatted forms for LLC resolutions are available to make this process easier. These include:
- LLC articles of organization
- Meeting minutes
- LLC operating agreement
- Operating agreement for manager-managed LLC
- Operating agreement for single-member LLC
- LLC capital contribution
- Amendments for various resolutions
- Bills of sale for capital contribution and membership interest
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