Key Takeaways

  • An LLC resolution documents official actions or decisions made by the members or managers of a limited liability company.
  • While not always legally required, LLC resolutions strengthen internal recordkeeping and clarify member authority, especially for financial and contractual matters.
  • The LLC’s Articles of Organization and Operating Agreement typically define the procedures for passing and documenting resolutions.
  • Common uses include opening bank accounts, approving real estate purchases, entering contracts, and authorizing loans.
  • Including dispute resolution and voting clauses in the operating agreement can prevent deadlock among members.
  • Proper documentation of LLC resolutions protects members, demonstrates compliance, and reduces risk in litigation or audits.

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.

Operating Agreement and Decision-Making Framework

An LLC’s operating agreement serves as the cornerstone for governance and decision-making, guiding how LLC resolutions are proposed, debated, and approved. This agreement should clearly define voting procedures, quorum requirements, and decision thresholds for significant actions. For instance, some LLCs require a unanimous vote to amend the operating agreement or approve new members, while others may allow a simple majority for day-to-day operations.

The operating agreement can also establish protocols for resolving disagreements among members before they escalate. Common mechanisms include mediation, arbitration, or buyout clauses that allow an exiting member’s ownership to be fairly valued and transferred. Such provisions ensure that even contentious issues—like profit distribution or management changes—can be handled efficiently without disrupting business operations.

Resolution Requirements

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.

When and Why to Use an LLC Resolution

LLC resolutions are most valuable when a company needs to show proof of authorization to third parties such as banks, investors, or regulatory agencies. For example, a bank may request a resolution verifying who is authorized to open accounts or sign checks. Likewise, lenders often require resolutions approving loans or credit lines before finalizing financing.

Resolutions can also formalize major business actions, including:

  • Approving contracts or service agreements.
  • Authorizing the sale or purchase of company assets.
  • Admitting new members or changing ownership interests.
  • Hiring key executives or changing management structure.
  • Amending the company’s operating agreement or bylaws.

Although some LLCs rely on informal agreements, adopting written resolutions ensures decisions are transparent, binding, and legally defensible if disputes arise.

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

Dispute Resolution in LLC Governance

Conflicts among LLC members can arise over management duties, profit sharing, or strategic direction. To minimize disruption, an LLC’s governing documents should include a structured dispute resolution process. This often begins with informal negotiation among members, followed by mediation or arbitration if an agreement cannot be reached.

Arbitration offers privacy and efficiency compared to litigation, and many LLCs prefer it for resolving internal disputes. Including an arbitration clause in the operating agreement helps enforce consistent, cost-effective outcomes. If disputes involve member misconduct or breach of fiduciary duty, courts may still intervene, but clear documentation—such as past LLC resolutions—can provide valuable evidence of good-faith decision-making.

Best Practices for Maintaining Resolution Records

To protect the LLC’s legal standing, all resolutions should be stored with meeting minutes and other vital company records. Best practices include:

  • Keeping both digital and physical copies of resolutions signed by all approving members.
  • Recording the date, subject, and purpose of each resolution.
  • Ensuring consistency between resolutions and provisions in the operating agreement.
  • Having the company’s registered agent or legal counsel review significant resolutions.

Organized recordkeeping not only supports compliance with state laws but also simplifies future audits, ownership transfers, and legal due diligence.

Frequently Asked Questions

  1. What is an LLC resolution used for?
    An LLC resolution is used to formally document decisions or authorizations made by members or managers, such as approving loans, contracts, or ownership changes.
  2. Are LLC resolutions legally required?
    While not always mandatory, resolutions are recommended to provide evidence of authorization for major business activities and to maintain organized records.
  3. Who signs an LLC resolution?
    Typically, all members or managers who voted in favor of the resolution sign it, confirming their approval of the decision.
  4. How can LLCs avoid disputes among members?
    LLCs can include mediation or arbitration clauses in their operating agreements and use written resolutions to clarify and document decisions.
  5. How should LLC resolutions be stored?
    Resolutions should be kept with other key business records—digitally and physically—at the LLC’s principal place of business for easy reference and legal compliance.

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