What is an LLC Resolution?
When do you need one?
What are the essential elements you should know!
In this article, we will break down the notion of LLC Member Resolution so you know all there is to know about it!
Keep reading as we have gathered exactly the information that you need!
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What Is LLC Resolution
An LLC Resolution is a document outlining the decisions made by the owners of a limited liability company (LLC).
In essence, every company acts through its directors, officers, or legal representatives.
In the case of an LLC, the owners or “members” of the LLC are those that make decisions for the company and vote on various issues.
To document the LLC decisions and the member votes, an LLC resolution is drafted to keep records of the actions taken by the managers of the company.
When Do You Need One
A limited liability company may need to prepare a resolution to:
- Have a member open a bank account for the company or make account modifications
- Have an LLC member makes an important decisions for the company
- Have a member demonstrate it has the authority to act on behalf of the LLC
- Authorize a member to obtain financing for the company
- Perform a real estate transaction
- To deal with an unforeseen business situation
- To amend past resolutions that are still in effect
- To enter into a contract
- To change how profits are distributed to members
- To change, add, or remove members and membership rights
Unlike a corporation, an LLC does not have to prepare resolutions or comply with state laws in this regard.
However, many LLCs will nonetheless prepare resolutions to document important decisions by its members and to facilitate business with third parties.
It’s generally best practice to adopt resolutions for major decisions or those that involve significant financial risk.
How Does It Work
Limited liability companies are generally formed with the filing of its articles of organization with the local state.
The articles of organization describe the manner LLC members may vote on various topics and issues relating to the company.
The procedures outlined in the articles of organization allows for the resolutions LLC to be drafted and passed in accordance with the LLCs operating rules.
Typically, for a resolution to be adopted (or accepted), the majority of the members must vote in favor of the decision.
It is possible that the LLC operating agreement requires that specific issues achieve a different voting percentage like a super majority or unanimity.
In essence, the LLC authorization resolution must be adopted in accordance with the voting rules applicable to the LLC.
Once a resolution is drafted and adopted by the members, it will generally be signed by those who voted on the issues.
Content of Resolution For LLCs
A resolution is a document intended to document various business decisions, keep records of the votes cast by the members of the LLC, and potentially define the company’s actions in implementing the decision.
This document does not need to be complicated or extremely detailed.
In fact, there are many LLC resolution forms and templates that can be purchased online to give you a framework to work with.
The overall objective of the LLC is to ensure that you keep written records of the members’ decisions over time.
Here is a quick overview of the actual content of a LLC resolutions:
- The LLC name
- Date the resolution was signed
- Descriptive title relating to the subject matter of the resolution
- Detail of the issues of business matter to discuss
- Description of the actions taken
- Name of the LLC members present
- Signature of the voting members
LLC Resolution Example
Although not all decisions made by the members of an LLC require a formal adoption of a resolution.
However, there are certain cases where it’s best to have the members document the issue, record their votes, and outline their plan of action to avoid disputes or misunderstandings.
Here are some example of situations where LLC members benefit by having a resolution:
- Make changes to the LLC articles of organization
- Make important financial decisions
- Make modifications to the LLC operating agreement
- Appoint a manager for a manager-managed LLC
- Adopt an operating agreement for a single-member LLC
- With regards to LLC capital contributions
- To amend past resolutions
- With regards to the bills of sale for capital contribution and membership interests
There are many LLC resolution samples that can be purchased giving you a “template” to work with.
LLC Resolutions: Takeaways
So, what is an LLC Resolution?
Let’s look at a summary of our findings.
What Is An LLC Resolution
If you enjoyed this article on LLC Resolution, we recommend you look into the following legal terms and concepts. Enjoy!
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