When an LLC is formally established after filing the articles of organization with a state's secretary of state, it's free to pass resolutions. Unlike corporations, LLCs are not required by law to use resolutions, nor are there any clear guidelines for doing it.
There are still benefits to passing resolutions within an LLC. For a start, LLC members and managers are bound by what's decided in the resolutions. It's particularly useful for multi-member LLCs to pass resolutions and create an operating agreement for the company.
One essential thing to keep in mind is that any LLC member has the right to propose a resolution. Whether the resolution will pass depends on most members voting in favor with the exact percentage determined by the rules governing the LLC. LLC resolutions are used for many purposes.
Some of the most common resolutions requiring voting have to do with opening a bank account or applying for a loan. An LLC resolution is also crucial when it's time to vote for a new LLC member or delegate LLC authority. Other uses may include buying real estate, approving profit distributions, and signing significant contracts.
Depending on your state, an LLC Resolution may also be known as:
Limited Liability Resolution
LLCs are not required to pass resolutions, but some of them do so anyway. Sometimes banks and lenders may ask to see a relevant LLC resolution. In particular, this may be because they want to make sure who has the authority to sign documents for the LLC. Or if they're going to make sure that the company's records are in order.
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Your LLC resolution should be concise and precise. It also must be accurate and contain all the necessary information. Having a suitable template in front of you when it's time to produce the resolution could save much time.
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To create your document, please provide:
Title of document: Give the resolution a descriptive name.
LLC details: The legal name of the company, the governing state, and the official address of the LLC.
Date and location: The date and place the resolution is reached.
Resolution: All the details of the resolution or resolutions.
Certification: The LLC's officer or secretary will review the document.
Signatures: The LLC's officer or secretary will have to sign the document.
LLC: Limited liability company
Corporation: A company structure or an entity bearing that structure and enjoys most of the rights afforded an individual
Member: An individual who has an ownership interest in an LLC
Managing Member: The member of an LLC who's in charge of its operations
Manager: A non-owner hired to manage an LLC
Agenda: List of items discussed in a meeting
Registered office: An LLC's office where a registered agent receives all of the LLC's paperwork
After an LLC resolution has been passed, all the members who voted need to sign the document. The person designated to write and store the resolution is also required to sign it. However, there's no need to involve a notary public for the document to be valid, as it's an internal document rarely used outside the LLC.
After the LLC resolution has been signed and adopted by the company, it should be kept with the rest of the company's written records. A hard copy is always good to have available too.
The designated person responsible for the resolution can distribute it digitally to the members and managers for record-keeping purposes.
If you’re a small business owner, you’ll likely be attracted to the idea of an LLC. There are fewer legal requirements to establish an LLC as compared to a corporation. There’s also more flexibility in regard to federal taxes. The owner of an LLC can either be taxed as a sole proprietor or as a partnership. Also, there are more options for how the profits are distributed. In general, an LLC requires less paperwork than corporations.
Also known as the certificate of organization, this is the application sent to a state’s Secretary of State to start an LLC. The document usually contains several official statements pertaining to the organization.
Even though LLC Resolutions are more common with multi-member LLCs, there’s nothing to stop a single-member LLC from using these. A third party may even request to see a resolution.
If you're the sole member of an LLC, it may seem unnecessary but having the proper documentation can be important for any company.
When an LLC has an even number of members, the voting process can be complicated in the event of a management deadlock. If the votes are tied, the management deadlock must be resolved according to the deadlock provisions previously established. Sometimes that means using an external tie-breaker, and other times one member may agree to sell provisions to another. If the members can’t resolve the deadlock, the next step could be arbitration or litigation.
If you're a member, you should have a copy of the LLC’s operating agreement. This is an important document that clearly states the internal rules and regulations governing the company's management. By virtue of the operating agreement, members and managers can minimize disagreements in the LLC.
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