The LLC is a type of business structure that allows companies to enjoy limited liability, pass-through taxation, and other benefits. An LLC member’s resolutions are the documents used by members to exercise their rights within an organization, like voting, attending meetings, or providing input on behalf of another member. LLCs are partnerships between members. Members can be individuals, corporations, or other LLCs. The “LLC partnership” is a member resolution that allows members to vote on issues that may come up in the future. LLCs, unlike corporations and other commercial organizations, are not compelled by law to record some business decisions.
Documenting choices made among members, on the other hand, may help you protect your LLC and prevent costly conflicts. Unfortunately, there are no particular procedures for crafting an LLC resolution since no state or federal laws are in force, which might confuse members. This tutorial will teach you all you need to know about LLC member resolutions so that you and the other LLC owners can get on the same page and formally record crucial choices.
What Are Member Resolutions in an LLC?
LLC member resolutions are written papers that detail the members’ choices and activities. The goal of this paperwork is to affirm and record that the members reached an agreement, which will prevent future disagreements and misunderstandings. Any LLC member can propose a new resolution, and it usually requires a majority vote to pass. If one LLC member wanted to sell a piece of company-owned property, for example, they would present a resolution and legally record the voice of all members. If the vote passes, the resolution will be used as evidence if a member claims the transaction was not lawfully allowed.
The Fundamentals of Member Resolutions in a Limited Liability Company
Let’s look at the essential components of LLC member resolutions in more detail. The guidelines for member solutions and what the document should contain examples and more are outlined in the following section.
Operating Agreement and Articles of Organization
Before going into further detail on LLC member resolutions, let’s go through the organization and operating agreements articles. These papers should be written when your LLC is first formed, and they will eventually outline the rules and voting processes for all LLC resolutions. All members, management structure, and other important information regarding the LLC will be included in the articles of the establishment. This information will be expanded upon in your operating agreement, which will contain specifics on the business’s day-to-day operations. It also includes information on member ownership percentages, voting rights, obligations, powers, duties, buy-and-sell regulations, and meeting processes, among other things. Even instances when a resolution may be employed could be included in the operating agreement. LLC member resolutions may be necessary for unanticipated scenarios, even though items like which members have the power to perform certain acts are explicitly specified in an operating agreement. It would be best if you referred to the operating agreement and articles of organization for voting rights and authority during a resolution. Consider the following scenario: you have a five-member LLC. Is each member’s vote weighted equally when the franchise puts the proposed solution? Votes may be based on ownership share in your operating agreement, giving members a more significant investment in the firm additional voting power.
Examples and Scenarios of When to Use LLC Member Resolutions
For fundamental day-to-day operational activities, member resolutions aren’t required. Most of the time, LLC resolutions are only utilized for critical issues that pose a high financial risk. For example, a solution would not include taking a customer out to lunch or purchasing food for the staff break room. Members of an LLC usually can make decisions like this without consulting the other members. Any inconsistencies in the operating agreement should be explicitly stated.
However, there are a few frequent instances in which an LLC member resolution is required:
- Changing Profit Distributions — Assume an LLC member wishes to reinvest a more significant portion of earnings in the company’s operational capital for the future year. You won’t need to amend the company’s operating agreement if this is only a one-time choice for one fiscal year. Instead, members may vote on it and record their choice in a resolution governing distributions, and everything will be back to normal the following year.
- Obtaining a Loan or Opening a Bank Account – A resolve should accompany any action with substantial financial consequences. For example, this clears any ambiguity about who can make checks or spend monies from a loan. This type of documentation, known as a “banking resolution,” is required by some financial institutions for internal purposes.
- New Contracts — Contracts involving a large sum of money or a high level of risk should be passed and recorded with a resolution. This might be anything from a long-term consulting company to property sales and new business relationships.
- Member Rights — Adding, Removing, or Transferring — Most of these possibilities should be addressed in your operating agreement. However, an unforeseen incident may occur, such as losing a family member. If you don’t have a section in your operating agreement that addresses this, your LLC will have to follow the state’s rules. A resolution should still back up these acts by LLC members.
In conclusion, LLC member resolutions may be utilized to make any significant company decision. Of course, what counts as “significant” or “important” is a matter of opinion. But, in this case, it’s advisable to err on the side of caution and apply a resolution for anything that isn’t clear.
Resolutions of LLC Members
As previously stated, each company’s member resolution method will be different. Meeting protocols are defined in your operating agreement. However, here’s a basic rundown of how the process works in general. Any LLC member may propose a resolution. However, all members must vote on the proposition. An LLC member resolution will need a majority vote to succeed in most circumstances. However, voting rights and voting power may be determined by firm ownership. Before the meeting, all of this would be spelled out in the operating agreement. The resolution is carried if enough members vote “yes” on the proposal. The members will then sign the paper to make the vote official.
Resolutions of a single-member LLC vs. Resolutions of a multi-member LLC
LLC resolutions are significantly more prevalent in LLCs with several members for obvious reasons. First, they aid in preventing conflicts and disagreements when a member’s recall of a previous decision becomes unclear. While it may seem absurd to produce a resolution for your single-member LLC, there are situations in which a resolution may be used as a legal record. To begin, it’s an innovative business practice to keep track of important financial choices. Your records may also be valuable if you disagree with a coworker or management, as well as an outside vendor or business partner. In this scenario, the resolution is more about formalizing an activity than passing a judgment. Finally, certain third parties may need an LLC resolution to define power, even single-member LLCs. This may be required in certain company transactions or even bank loans.
What Should LLC Member Resolutions Contain?
The majority of LLC member decisions are simple. The complete resolution is frequently condensed into a one-page document that contains the following information:
- LLC name
- The meeting’s date and time
- The proposal’s title and description (i.e., new contract, loan, profit distributions, etc.)
- Members who voted and approved the resolution are listed below.
- Members who voted and dissented are listed below.
- The answer is approved and adopted with a statement of approval.
- Signatures of each member, signed and dated.
When going through this procedure, it’s helpful to use an LLC member resolution template. As we go through this book, we’ll go through templates in more depth.
3 Tools to Help LLC Members Resolve Issues
There are a variety of online resources available to assist with LLC member resolutions to make your life simpler. My top three suggestions are as follows:
1. LegalZoom
LegalZoom offers various business services for a variety of entities, including LLCs. In addition, they’ve developed approximately two million operating agreements for limited liability companies, making it one of the most popular options on the market. So, if you don’t already have an operating agreement in place, LegalZoom can help you become organized so that when a resolution is needed, everything goes smoothly. All of LegalZoom’s LLC formation services include a financial permission letter, which may be used to indicate who is allowed to establish a bank account and, in some instances, can prevent the need for a member resolution. The cost of operating agreements is $99, while the cost of firm incorporation is $79.
2. Rocket Lawyer
Rocket Lawyer makes it simple to establish an LLC member resolution. Begin with a business resolution template, complete a few questions, and Rocket Lawyer will fill in the blanks for you. For example, you’ll be asked to fill out form blanks about your company name and the adopted resolution, members, and other information. Rocket Lawyer even supports digital signatures, allowing you to sign documents electronically. The charge is $39.99 per document if you are not a Rocket Lawyer member. Alternatively, for $39.99 per month, you may become a member and generate limitless free legal papers.
3. Registered Agent in the Pacific Northwest
Northwest Registered Agent is a great place to create a company or an LLC. They provide free legal papers, such as LLC member resolution templates and incorporation and registered agent services. Northwest Registered Agent offers various documents you may use to establish LLC processes in addition to the resolution templates. Examples are articles of incorporation, operational agreements, meeting minutes, articles of modification, and other templates. Registered agent services start at $125 per year, and these templates are completely free.
3 Ways to Get LLC Members to Stick to Their Resolutions
As someone who has gone through LLC member resolutions before, I’d like to provide some brief advice and activities you can do right now to make the process go more smoothly. The excellent practices listed below are ideal for beginners.
1. Use an LLC Member Resolution Template
Because member resolutions aren’t legally necessary, accurately documenting the meeting and voting on your own might be difficult. The last thing you want to do is leave out crucial information that will render the resolution null and invalid. Fortunately, there are many excellent LLC member resolution templates available online. Starting with the materials above is a beautiful place to start, but you may use any template you like. You might also seek advice from your company attorney and request a template that they propose. However, in most circumstances, the templates we discussed in this article will suffice.
2. Keep Your Records in a Safe Place
What happens when the decision is made? During the vote, your LLC will perform whatever action is approved. However, if a disagreement or issue arises one, two, three, or even five years from now, you’ll want to ensure that the remedy is readily available. I suggest keeping your LLC resolution alongside all other critical company paperwork in a secure location. It may be marked with your operating agreement, articles of incorporation, modifications, tax records, and other essential documents. Keep a physical copy on hand and a digital backup on the cloud.
3. Make a Voting Deadlock Strategy
If your LLC has an even number of members, a vote on a resolution might result in a tie. You should be proactive and have a strategy to deal with deadlocks to prevent them. Your operating agreement should contain provisions for voting deadlock. This will save you money in the long run by avoiding expensive litigation, mediation, and operational delays. You might, for example, have a third-party body or person with the power to break the tie. This person should be unbiased and knowledgeable about the company and industry. Tie-breakers might also be rotated among the members. In this situation, in the case of a tie, one member would cast the decisive vote. Another member would have the right to decide during the following stalemate, and so on. If you can’t solve the problem internally, you’ll be obliged to use mediation, arbitration, or other measures. Injunctions, judicial dissolutions, or judicial expulsions might be issued in severe cases. However, you may prevent this by putting a simple strategy to break the tie.
What Should I Do Next?
Now that you know what LLC member resolutions are and how to utilize them, there are a few more things to think about. First, LLC member resolutions are pointless if you can’t access them in the case of a disagreement, as previously stated. Please loSecond, please our list of your company’s top cloud storage options. This will make storing your resolutions and other critical business papers easier. Third, before taking out a loan, many LLCs look into member resolutions. If you’re in this situation, have a look at our list of the most acceptable business loans before making a choice. This will assist you in obtaining the most amount of money at the most significant rate for your loan.
Frequently Asked Questions
How do you write a resolution for an LLC?
A: There is no set formula for writing a resolution. The steps to writing the document are as follows:
-Find and write down what it means to be an LLC.
-Determine if you need any additional information such as whether or not your company will issue shares, how many shareholders there will be, etc.
Does an LLC need corporate resolutions?
A: The short answer is no. However, you should be able to find the information needed on your state’s website – although it may take some time and digging through sections of their statutes.
What is a member resolution?
A: A member resolution is the number of pixels on a screen. For example, if your TV has a resolution of 1080p (1080), that would be one member resolution.
Related Tags
- what does LLC mean in business
- corporate resolution