Updated September 25, 2023
A board resolution is a legal document that records an important decision reached by the members, or owners, of a limited liability corporation (LLC). Generally, resolutions are not used to chronicle day-to-day decisions; instead, they are a means of recording actions that considerably impact an entity’s structure or operations.
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What is a Board Resolution?
Resolutions record the decisions taken by members of an LLC. Some institutions, such as banks and the IRS, require resolutions as a means of verification. In addition, resolutions provide a paper trail of an LLC’s history. They keep decision-makers accountable and can be used as evidence in legal proceedings.
A quorum of members, or a minimum number of members prescribed by an LLC’s operating agreement, must vote on a resolution in order for it to pass.
Board vs. Corporate Resolution
A board resolution refers to a document that records a decision made by the members of an LLC, whereas a corporate resolution is used by a corporation.
There are some notable differences between the two types of entities. An LLC is owned by its members and governed by an operating agreement. A corporation, on the other hand, is owned by shareholders and run by a board of directors that represents them. The board of directors is bound by the corporation’s bylaws.
Both types of resolutions follow the same format.
Reasons to Use a Resolution
- Opening a bank account
- Purchasing property
- Approving or amending an operating agreement
- Voting in new members
- Approving a merger or acquisition
- Resolving disputes
- Approving an annual budget
- Initiating litigation
- Selling stocks
- Assigning signing authority
- Applying for federal benefits
Types of Board Resolutions
There are three types of board resolutions, which differ according to the number of voters required to pass them. They are:
- Ordinary resolution: An ordinary resolution records a decision voted on by more than 50% of the LLC’s members. If an LLC is owned by five members, for example, then three members would need to vote in order to pass an ordinary resolution.
- Extraordinary resolution: This type of resolution requires a higher percentage of voters in order to be valid because it records a more important decision than an ordinary resolution. The voting threshold required to pass an extraordinary resolution is typically 75%, but can be higher or lower; this threshold is usually outlined in the LLC’s operating agreement. Extraordinary resolutions are also known as special resolutions.
- Unanimous resolution: A unanimous resolution is a resolution passed by all members of an LLC, or 100% of the entity’s voters. This type of resolution is required in specific and rare circumstances, such as when an LLC merges with another entity.
Key Elements of a Board Resolution
Like corporate resolutions, board resolutions follow a specific format and structure. These are some of their key elements:
- Date: A resolution should include the date on which it was passed.
- Resolution number: Assigning numbers to resolutions can make them easier to access and reference.
- Title: The title should refer, in some way, to its subject matter. An example is “Resolution to Authorize the Sale of Real Estate Assets.”
- Votes: A resolution should indicate who voted on the decision, and how.
- Recitals: These are statements that provide background information about why a decision is being made.
- Resolutions: These are statements that record the decision being made.
- Signature: Whichever member of the LLC possesses signing authority must sign and date a resolution for it to be valid.
What are Recitals?
The first section of a resolution is comprised of a series of recitals, which are statements that offer context for the decision being made. Recitals begin with the term WHEREAS. This is an example of a recital: “WHEREAS, the members of Peter Ray LLC recognize the growth potential of acquiring Ray Peter Systems…”
What are Resolutions?
The second section of a resolution lays out the terms of the decision being documented. Typically, resolutions begin with the phrase BE IT RESOLVED. This is an example of a resolution: “BE IT RESOLVED that Peter Ray LLC execute an agreement to purchase Ray Peter Systems…”
Signing Authority
Typically, one or two members of an LLC are authorized to sign resolutions. Coincidentally, this signing authority is assigned by a resolution.
Recording Resolutions in Minutes
Resolutions are typically reflected in LLC meeting minutes, or notes that are taken at a meeting of an LLC’s members. These record who was there, who was not, who voted on what, and what business was discussed.
How Long to Keep Resolutions on File
It is not necessary to file resolutions with any external agency or institution. However, they should be kept as an internal record of the LLC’s voting history. The IRS recommends keeping resolutions, as well as other business-related documents, on file for between two and seven years. Some should be kept for the lifespan of the LLC, such as those resolutions that amend an LLC’s operating agreement.
Sample Resolution
RESOLUTION
OF
[NAME OF LLC]
For the purpose of [DESCRIBE PURPOSE OF RESOLUTION]
I, [NAME], the [TITLE] of [NAME OF LLC] (“LLC”), a limited liability corporation organized under the laws of the state of [STATE], with its primary place of business at [BUSINESS ADDRESS], hereby certify that the following is a true and complete copy of a resolution the owners the LLC (“Members”) adopted
☐ – By unanimous written consent of the members as permitted in the LLC’s operating agreement and the law of the state of [STATE].
☐ – By a vote of the members at the meeting taking place on [DATE OF MEETING]. A quorum was present and the vote complied with the LLC’s operating agreement.
I further certify that it has not been amended, modified, or repealed.
WHEREAS
[RECITALS];
Therefore, be it
RESOLVED, that
[DESCRIBE RESOLUTION].
FURTHER RESOLVED, that
[DESCRIBE RESOLUTION].
In witness whereof, I have set my hand on behalf of the LLC on [DATE].
By: ___________________________________
Print Name: _____________________________
Title: __________________________________