Corporate Resolution

What is a Corporate Resolution?

A corporate resolution is a written document that details any corporate action taken by the board of directors of a company. This is an important part of corporate governance because it documents important decisions and proves that the board of directors is upholding their fiduciary duties to the shareholders of the corporation.

It is common for a corporation to use a corporate resolution to establish itself as an independent legal entity separate from the owners of the company. This independence from individual owners avoids conflicts of interests and protects owners from liabilities of the corporation under a corporate veil.

Both S Corps and C Corps require corporate resolutions, however corporate resolutions aren’t necessary for everyday business activities. They are only required when the board of directors makes a significant business decision. A corporate resolution creates a paper trail of an important decision in case it ever needs to be reviewed by shareholders, officers, or the IRS.

Once a corporate resolution is signed, the secretary of the corporation will file the resolution the corporate records book . It is also common to find record of a corporate resolution in the board meeting minutes.

For more information about what a corporate is and how it works, read this article.

What To Include in A Corporate Resolution?

Corporate resolution format is mainly determined by the state business laws; however, most states require the following general information:

• The date the resolution is made
• The location in which the corporation is doing business
• Signatures of the officers who have the signing authority for corporate resolutions
• The title of the corporate resolution
• A consent phrase indicating that the resolution has been agreed upon by the board and whether it was passed with unanimous consent
• If the resolution did not pass with unanimous consent, the resolution needs to state each voter’s name and how they voted
• A final statement that dictates the action that will be taken because of the resolution

Generally, a corporate resolution is created, voted upon, and signed at a corporate meeting. The resolution will then be detailed in the meeting minutes including information about whether the resolution was approved or voted down.

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Examples of Actions that Need Corporate Resolutions

All major decisions made by a board of directors need to be recorded as a corporate resolution. This keeps the board held accountable and ensures that the board is acting in the best interest of the company.

Below is list of examples of corporate actions that usually require a corporate resolution:

1. Approval of new board members and officers
2. Acceptance of the corporate bylaws
3. Creation of a corporate bank account
4. Designating which board members and officers can access the bank account
5. Documentation of a shareholder decision
6. Approval of hiring or firing employees
7. Changes in the management department like a new secretary or CEO
8. Changes in salaries or bonuses including changes in health benefits or retirement plans
9. Approval of the selling of shares
10. Buying or selling corporate real estate
11. Joint venture decisions
12. Expansion of the business
13. Financial decisions like taking out a new loan
14. Approval of a marketing campaign or use of a new trademark

LLC Corporate Resolutions

Even though an LLC isn’t a corporation, the owners can still choose to follow a corporate structure and use corporate resolutions to record important decisions made by the company.

LLCs are required to file articles of organization just like a corporation to be legally recognized as a business. For this reason, many LLCs choose to record their LLC operating agreement as a corporate resolution even though resolutions aren’t required.

Just like in a corporation, LLCs can use corporate resolutions to record management structure, rights and responsibilities of members, and other important company rules and regulations.

It is beneficial for any company to use corporate resolutions and keep a good record of important business decisions. This holds the company and its operators accountable and makes accessing records easy in the event of an audit.

Corporate Resolutions vs. Articles of Incorporation

Although articles of incorporation are an important part of corporate governance just like corporate resolutions, these are two very different legal documents.

A corporation’s articles of incorporation register the business with the state and proves that it is a legitimate, legally operating business. Articles of Incorporation include the name of the corporation, the state where the corporation is formed, address of the business, management structure, formation date, and signature of the authorized representative.

Corporate resolutions document actions made by the corporation after formation and do not have to be filed with any government agency.

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Creating Corporate Resolutions

Corporate resolutions are usually created at board meetings and there are a few essential elements that should be included when drafting this document.

1. Heading: The top of the page should have a heading that clearly displays the name of the company and who is making the resolution, the board of directors, for example.
2. Title: If the resolution was not adopted formally at a meeting, the title usually includes the words “ written resolution ” to distinguish it from other resolutions that may have been made at the meeting.
3. Recitals: Recitals are formal words that explain the issue that the resolution is meant to solve. If the company is looking to open a bank account, the recitals will state that it is the intention of the board of directors to obtain a bank account through the selected bank.
4. Resolutions: Resolutions make up the body of the corporate resolution document. The resolutions describe the actions that will take place because of signing the document. In the example of opening a bank account, the resolution should describe:
   • What bank the account will be opened at
   • Authorization for the treasurer to fund the account
   • Authorization for certain board members to access the account
5. Attestation: The attestation confirms that all the information in the corporate resolution document is true and accurate. It is then signed and dated by whatever board member has signing authority for the corporation.

Read this article for more tips and information about how to write a corporate resolution.

Corporate Resolutions vs. Meeting Minutes

Meeting minutes and corporate resolutions can easily be confused because they are both documents that detail actions taken by the board of directors and are important for a corporation’s records.

Meeting minutes record the proceedings of the entire meeting and will detail all decisions made at the meeting. Also included in meeting minutes are the names of everyone who attended the meeting, record of who introduced the resolutions during the meeting, and who voted on resolutions.

At each meeting, one of the first actions is to ratify the minutes from the previous meeting.

Corporate resolutions are different from meeting minutes because a resolution document is a record of the actual decision for a specific matter.

State’s business laws may vary and have different requirements for record keeping. It is important to be sure you are following both state laws and your corporate bylaws when it comes to meeting minutes and corporate resolutions.

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