Resolution of Managers of LLC: Everything You Need to Know
A resolution of managers of LLC is an official decision adopted by those who run a limited liability company.3 min read
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.
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.
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 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.
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