Key Takeaways

  • An LLC resolution is a written record of important decisions made by members or managers that provides legal proof of approval.
  • Although not always required by law, resolutions help prevent disputes, satisfy recordkeeping rules, and reassure banks, investors, or courts.
  • LLC resolutions are often used for high-stakes matters such as loans, contracts, profit distributions, or adding/removing members.
  • Drafting an LLC resolution typically requires basic details: company name, date, title of the decision, description of the action, and signatures.
  • Both member-managed and manager-managed LLCs may require resolutions, depending on the operating agreement and the scope of authority given to managers.
  • State laws may impose additional requirements for maintaining resolutions as part of permanent records.

A resolution of managers of LLC is an official decision adopted by those who run a limited liability company. This business entity is similar to a corporation, but offers specific tax and legal benefits, as well as management flexibility.

What Is an LLC Resolution?

While LLCs are not legally required to memorialize business decisions with a formal resolution, many businesses choose to do so. Banks and investors may require a copy of the LLC resolution for a specific business transaction.

These resolutions are passed with a membership vote; LLC owners are referred to as members. The resolution is a simple legal document that describes the action taken by members or managers. For example, a resolution about a decision made to purchase real estate would include information about the property's address and sales price.

The LLC resolution can also be used to document important ownership decisions, such as signing a contract that carries financial risk or entering a long-term lease. Creating a resolution in this instance can prevent future disputes by proving that all members met and approved the decision in writing.

The resolution should describe the action in question and be signed by the required number of managers or members for approval. In general, once a resolution is passed by a member vote each member must sign the document. Although those who dissent are not required to sign the resolution, they are still legally bound by its terms.

When Is an LLC Resolution Necessary?

LLCs typically operate with fewer formalities than corporations, but there are many situations where a resolution is critical. Common examples include:

  • Financial transactions: Opening business bank accounts, applying for loans, or authorizing large expenditures. Many banks specifically require a “banking resolution” outlining who may sign on behalf of the company.
  • Contracts and leases: Documenting approval before entering into contracts that involve financial risk, such as long-term leases or service agreements.
  • Real estate deals: Recording decisions to buy, sell, or lease property, including key details like the address, description, and purchase price.
  • Profit distributions: Authorizing temporary changes to distribution formulas, such as reinvesting profits during an economic downturn.
  • Membership changes: Adding or removing members, transferring ownership interests, or addressing the death or withdrawal of a member.

Even single-member LLCs may use resolutions to demonstrate compliance to regulators, courts, or potential investors.

How Is an LLC Formed?

Many business owners prefer the LLC structure because it does not require the recordkeeping and meeting formalities of a corporate entity. An LLC is formed by filing documents called articles of organization with the state. This document also establishes the operating guidelines for the business, including the procedure for passing LLC resolutions. For example, is a majority vote required or will you require a different voting percentage?

What Is the Management Structure of an LLC?

The LLC members can determine whether to manage the business themselves or appoint managers to do so. This management flexibility is permitted because LLCs have no obligation to protect shareholders or other public investors since it is a private entity. While members can choose to adhere to corporate formalities, they are not bound to do so by law.

When an LLC is managed by a manager appointed by the members, he or she may be authorized to take certain actions without having a resolution in place. In this case, the manager's signature on the contract would serve as proof of his or her approval. However, when more than one manager runs the business a resolution may be needed to indicate that all are on the same page about important decisions.

In some cases, managers are not authorized to take certain actions that require member resolution. These actions can be detailed in the LLC's articles of incorporation or operating agreement.

How Do You Pass an LLC Resolution?

Any member (or manager, depending on structure) can propose a resolution. To become effective, the resolution must:

  1. Be put to a vote: Most LLCs require majority approval, though some operating agreements weigh votes based on ownership percentage.
  2. Be documented in writing: A resolution is usually one page and should state the company’s name, the date, a title describing the action (e.g., “Resolution to Open Checking Account”), and details of the decision.
  3. Be signed by approving members or managers: Those who vote “yes” sign the document. Those who dissent are not required to sign but are still bound by the decision.
  4. Be kept in the company’s records: Resolutions should be stored with articles of organization, tax filings, and other official records.

What Are the LLC Voting Procedures?

  • A vote of LLC members can be documented with a written resolution.
  • The operating agreement or articles of incorporation can state what types of decisions must come with a formal resolution and the membership percentage that must vote to pass a resolution.
  • Keep in mind that if your LLC has an even number of members, votes may be divided equally, so it's important to adjust your voting formula to avoid a tie.
  • Once a resolution is passed and documented, it must be signed by the board chairman, managing member, or another authorized representative.
  • The secretary of the board is usually responsible for preparing the resolution.

What Should an LLC Resolution Include?

While the format may vary, most LLC resolutions contain:

  • The company name and principal place of business.
  • The date the resolution was adopted.
  • A title clearly stating the action (e.g., “Resolution to Approve Lease Agreement”).
  • A description of the decision and relevant details (such as dollar amounts, contract terms, or parties involved).
  • The signatures of approving members or managers.

Templates for LLC resolutions are widely available, but complex or high-value matters may benefit from attorney review.

What Are State Record and Transaction Requirements?

Some states legally require LLCs to maintain specific records at its main business location, often copies of tax filings or articles of organization. In some states, the capital contribution and distribution percentage of each member must be recorded, often in the form of a resolution. You should file signed LLC resolutions with these official records and they should be kept indefinitely so you can have proof of the voting process behind a formal decision. They may also be required to prove authorization for tasks such as opening a business bank account.

Types of LLC Resolutions

LLC resolutions can be categorized into different types depending on the business decision being documented:

  • Banking Resolution: Authorizes members or managers to open and manage business bank accounts.
  • Contract Resolution: Approves entry into a contract with a third party.
  • Real Estate Resolution: Approves purchase, sale, or leasing of real property.
  • Profit Distribution Resolution: Adjusts or authorizes distributions to members.
  • Membership Resolution: Governs admission, withdrawal, or expulsion of members.
  • General Business Resolution: Covers other significant decisions not specified above.

Identifying the type of resolution ensures clarity and makes it easier for outside parties, like lenders or auditors, to verify the scope of authority.

Frequently Asked Questions

  1. Is an LLC resolution legally required?
    Not always. Most states do not mandate resolutions, but banks, investors, or courts may expect them as proof of authority.
  2. Can a single-member LLC use resolutions?
    Yes. While not required, resolutions help document decisions and provide a clear record for regulators, auditors, and financial institutions.
  3. Who can sign an LLC resolution?
    Members who voted in favor of the action must sign. Dissenting members need not sign but are still bound by the resolution.
  4. How long should resolutions be kept?
    Indefinitely. They should be stored with the LLC’s official records to show proper authorization of decisions.
  5. What is the difference between a corporate resolution and an LLC resolution?
    Both serve the same purpose of documenting decisions, but LLC resolutions are generally simpler since LLCs have fewer statutory formalities.

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