Key Takeaways

  • A business resolution is an official record of decisions made by directors, managers, or shareholders, often required for legal or financial transactions.
  • LLCs and corporations use resolutions to authorize actions such as opening bank accounts, approving contracts, or electing officers.
  • There are several types of resolutions—ordinary, special, and unanimous—each with different voting thresholds and purposes.
  • Conflict and dispute resolutions are essential for managing workplace, customer, and contractual disagreements.
  • Dispute resolution methods include mediation, arbitration, litigation, and increasingly, online dispute resolution.
  • Well-drafted resolutions should clearly identify the parties, actions authorized, and supporting details to be enforceable and useful in recordkeeping.

A resolution in business refers to a proposal made during a meeting of the company's shareholders or directors. It is discussed, and its approval represents an official confirmation of an action of any kind that will be taken by the company. There are four major types of resolutions: elective, extraordinary, special, and ordinary.

An example of a resolution in business is a company board's decision of reducing wages for its executives as a result of a long period of decreased profits, with the purpose of minimizing the company's overall expenses. A smaller scale business resolution would be a manager's decision to fire an employee due to bad performance.

Resolution in Business for a Limited Liability Company

Within an LLC, a resolution in business is a simple document describing the issue and proposed action that is to be taken, which then needs to be signed by the people in charge of a company. The document needs to contain the exact details of the issue. For example, in the case of a purchase, the resolution needs to specify exactly what is bought by the company and at what price. The document that describes the procedures for the limited liability company's everyday operations is called an operating agreement.

The way resolutions are approved or dismissed within a company is specified in its articles of organization. Typically, a vote takes place among the company directors and a majority vote is needed for the resolution to pass. The articles of organization need to be submitted to the same secretary of state office where the company was founded.

Common Situations Requiring Business Resolutions

Business resolutions are often necessary when companies take actions that affect governance, finances, or operations. Common examples include:

  • Opening or closing business bank accounts
  • Approving loans or lines of credit
  • Authorizing the purchase or sale of property or equipment
  • Electing new officers or directors
  • Approving mergers, acquisitions, or dissolution
  • Entering into high-value contracts or vendor agreements

In these cases, a resolution acts as proof that the business followed proper decision-making procedures, ensuring compliance with both internal governance documents and external legal requirements.

Types of Business Resolutions

usiness resolutions are categorized based on their purpose and the voting threshold required:

  • Ordinary Resolutions: Passed by a simple majority, often used for routine matters such as appointing auditors or approving annual accounts.
  • Special Resolutions: Require a higher threshold (commonly two-thirds or three-fourths of votes). These are used for significant changes, such as amending the company’s articles or approving mergers.
  • Unanimous Resolutions: Require all members’ approval, often reserved for matters where absolute consensus is critical.

Recognizing the correct type of resolution ensures that business actions are valid and enforceable.

Conflict Resolutions and Their Use in Business

Conflict resolutions are passed to resolve any issues that may occur with customers, contractors, or employees. Finding ways for the company to deal with certain conflicts is a crucial step to maintain profits, productivity, customer satisfaction, and a good company image. The best results are achieved when resolutions are implemented before situations further escalate. The skill and determination with which the management handles conflicts are vital for the reputation of the company.

An approach that ensures long-term success is seeking a resolution that benefits all parties involved, instead of one that focuses solely on the benefit of the company. The reasoning behind that is avoiding long-term consequences of resentment from the other party that may generate future issues. Fully understanding the scope of the problem and viewing it from all sides is important for formulating a resolution that pleases everyone involved. Once an issue is resolved, steps must also be taken to make sure that the same issue will not occur again.

Importance of Written Resolutions

Written resolutions serve several important purposes:

  • Legal Record: They provide documented evidence that the decision was authorized by the governing body.
  • Banking and Finance: Lenders and banks often require copies of resolutions before approving loans or account changes.
  • Dispute Protection: Clear records can help protect the company in case of shareholder disputes or legal challenges.
  • Operational Clarity: Employees and managers can rely on resolutions to understand who has authority to act on behalf of the business.

Well-drafted resolutions reduce ambiguity and protect the company’s leadership from claims of unauthorized actions.

The Three Kinds of Dispute Resolution

There are three major types of resolving a dispute: mediation, arbitration, and litigation.

  • Mediation is an attempt to resolve a dispute by bringing in a neutral party that analyzes the situation and has the goal of helping those involved to come up with a resolution that satisfies everyone.
  • Arbitration also implies a third party analyzing the situation and hearing all sides. However, the difference between arbitration and mediation is that the former allows the neutral party to make a decision that everyone involved must accept.
  • Litigation is the most commonly used way to resolve a dispute and it involves a judge, with or without a jury, analyzing all the evidence and making a binding decision. This type of dispute resolution is usually initiated by one of the involved parties, named a plaintiff, and it is taken against another party, referred to as a defendant.

Best Practices for Drafting a Business Resolution

When preparing a business resolution, include details that make it specific and enforceable:

  1. Title and Date: Identify the resolution and when it was adopted.
  2. Purpose Statement: Clearly state the action being authorized.
  3. Authority: Reference the articles of organization, bylaws, or operating agreement that grant authority for the decision.
  4. Approval Method: Indicate whether it was passed at a meeting or by written consent.
  5. Signatures: Include signatures of directors, managers, or members as required.

Keeping resolutions organized in a company’s minute book or records folder is essential for audits, legal compliance, and future reference.

Resolving Business Disputes Online

Professionals have created an alternative to litigation, motivated by the need for faster and more efficient ways of resolving business disputes. Online dispute resolutions combine mediation and arbitration, enabling the disputing parties to resolve their differences in a significantly shorter amount of time than through the court system. It is also significantly less expensive, due to the elimination of legal fees. Resolving disputes online has no geographical limitations, either.

When to Seek Legal Help for Resolutions

Although many routine resolutions can be handled internally, some circumstances call for professional guidance:

  • Complex transactions, such as mergers or acquisitions
  • Disputes between shareholders or LLC members
  • Amendments to articles of incorporation or operating agreements
  • Situations involving regulatory compliance or tax consequences

An experienced business attorney can draft or review resolutions to ensure they meet statutory requirements and protect the company’s interests. If you need assistance, you can find a qualified attorney on UpCounsel’s marketplace.

Frequently Asked Questions

  1. What is a business resolution and why is it important?
    A business resolution is a formal decision made by a company’s governing body. It is important because it provides a legal record that actions were properly authorized.
  2. What types of business resolutions exist?
    The main types are ordinary resolutions (simple majority), special resolutions (higher threshold), and unanimous resolutions (full consent).
  3. When does an LLC need a resolution?
    LLCs need resolutions for significant actions such as approving loans, authorizing contracts, or amending the operating agreement.
  4. How should a business resolution be written?
    It should include the title, date, purpose, authority reference, approval method, and signatures of authorized individuals.
  5. Are business resolutions legally binding?
    Yes, when properly drafted and adopted according to governing documents, business resolutions are legally binding and enforceable.

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