Corporate Resolution Guide: Uses, Examples, and Best Practices

Running a business involves making big decisions. Maybe it was opening a new office or bringing on a key executive. When it’s time to make those choices, corporate resolutions are formal documents that record the decisions made by your company’s board of directors.

Whether you’re running a small startup or a large corporation, these resolutions serve multiple functions. For one, they create a clear paper trail so you can see who decided what and when. This knowledge can protect your company from legal trouble, keep you in line with regulations, and maintain trust with your investors.

There’s more, too. If you’re looking to learn more and become a master of corporate resolutions, keep reading. Mosey will show you all you need to know to use resolutions effectively.

What Is a Corporate Resolution?

A corporate resolution is a legal document that spells out a specific action or decision your board of directors has approved. More than a piece of paper, this binding agreement carries real weight.

Your board of directors is responsible for creating and approving these resolutions. That way, you can be sure any important decisions are made with your company’s best interests in mind. Once approved, the resolution becomes part of your company’s official records.

Your company’s articles of incorporation are like its birth certificate, establishing its legal existence and basic structure. Corporate resolutions, on the other hand, are like the chapters of a book, documenting the key decisions that shape the company’s journey.

Why Are Corporate Resolutions Important?

If you’ve ever lost track of a crucial decision or faced questions about who authorized what, you know the value of a clear record. Corporate resolutions serve as that record, but with much higher stakes.

Your board members are the captains of your company’s team. Through their fiduciary duty, they’re legally bound to always point your business and its shareholders in the right direction. Corporate resolutions are their playbook, documenting each decision and ensuring they stay true to their responsibilities.

But there’s more to corporate resolutions than keeping your board of directors accountable. Corporate resolutions also make sure that your personal assets are safe and sound.

Creating a clear separation between your board and your assets means you won’t have to worry about your nest being compromised if any legal issues arise. Indeed, corporate resolutions are vital to your company’s health and your own. Without them, you’re essentially putting your own pocketbook on the line.

Additionally, corporate resolutions keep everyone on the same page. With corporate resolutions, stakeholders better understand why big decisions were made and the reasoning behind them. It’s the kind of transparency you want to avoid misunderstandings, and, as a result, corporate resolutions help build trust among your members.

Corporate resolutions are worth the extra effort. Your assets are protected, open communication is promoted, and your members are more likely to make smart decisions for your business.

Who Needs a Corporate Resolution and When?

Corporate resolutions are a legal necessity for corporations. Whenever your company makes a major decision, such as acquiring another business, selling a significant asset, or changing its leadership, a corporate resolution must document that decision.

Corporate resolutions represent an official seal of approval from your board of directors. But what if you’re not a corporation? Perhaps you’re an LLC or a partnership. While you might not be legally required to use corporate resolutions, they can still be incredibly valuable.

Having a clear record of your major decisions can be a game-changer in establishing credibility with banks, investors, or potential partners. When exactly should you use a corporate resolution?

Here are a few common scenarios:

Opening a Business Bank Account: Banks often require a corporate resolution to verify that the person opening the account has the authority to do so on behalf of the company.
Entering Into Contracts: A corporate resolution can solidify the terms of a major contract and confirm that the company has authorized the agreement.
Making Significant Financial Decisions: Whether securing a loan or investing in a new venture, a corporate resolution can demonstrate that the decision has been thoroughly vetted and approved.
Hiring or Firing Executives: Changes in leadership are significant events for any company, and a corporate resolution can provide a clear record of the decision and its reasoning.

Skipping corporate resolutions might save you time if you’re a smaller business with a more informal structure, but doing so can have serious consequences. You could lose out on important opportunities, damage your reputation, or even face legal challenges.

What Are Common Types of Corporate Resolutions?

Corporate resolutions come in many flavors, each tailored to a specific type of decision. Here are some of the most common ones you might encounter:

Financial Resolutions: These deal with the money side of things, like approving budgets, securing loans, issuing stock, or making major investments.
Personnel Resolutions: These focus on changes in your company’s leadership or workforce, such as hiring or firing executives, approving compensation packages, or adopting employee stock ownership plans.
Operational Resolutions: These cover a wide range of decisions affecting your business, from opening new locations or bank accounts to adopting new policies and procedures.

One particularly important type of resolution is the corporate bank resolution. This document identifies who within your company is authorized to manage bank accounts and make financial transactions on behalf of the business. It’s a vital tool for preventing fraud and ensuring proper financial controls.

Remember, this is just a snapshot of the many types of corporate resolutions you’ll encounter. The specific resolutions you need will depend on your company’s unique circumstances and the decisions that you face.

How To Write a Corporate Resolution

A corporate resolution is essentially your plan for an important decision. Like any good plan, it needs the right components to turn out well. Here’s what you’ll need:

Date: This is your timestamp, telling you when the decision was made.
Title: The title should clearly state the purpose of the resolution (e.g., “Resolution to Authorize a Stock Purchase”).
State of Incorporation: This is the location where your company was formed.
Intentions (“Whereas” Statements): These explain the reasons behind the decision.
Actions (“Resolved” Statements): These outline the specific steps you plan to take, like the instructions of a recipe.
Consent Clause: This confirms that everyone involved agrees with the decision.
Signatures: These are the names and approvals of the people authorized to make the decision.

Use plain language, avoid jargon, and be specific about the actions you plan to take. It may be wise to have a lawyer review your resolution to make sure it’s in tip-top shape. And don’t forget the signatures, as they’re what make the resolution official.

What Happens After You Write a Corporate Resolution?

Once you’ve crafted your corporate resolution, it’s time to file it away with your other important documents, like your company’s articles of incorporation and meeting minutes.

Eventually, your resolutions may come in handy in several different scenarios. For example, if you’re opening a new bank account, the bank might ask for a resolution authorizing the action.

Additionally, if you enter into a partnership agreement, the other party might want proof that your company has officially approved the deal. If any legal issues arise, these resolutions can be crucial evidence in court.

It’s worth noting that shareholders can also submit resolutions for consideration. This approach gives them a voice in the company’s decision-making process, even if they’re not on the board of directors.

Contact Mosey and Stay Compliant

Corporate resolutions are the foundation of a well-run business. If you want to make sure you’re compliant, reach out to Mosey for expert help and guidance on state compliance.

Our business compliance platform can seamlessly organize and automate your compliance needs, ensuring your company stays current on legal requirements. With Mosey, you’ll spend less time learning the ins and outs of state regulations and more time fulfilling your business mission.

Schedule a demo with Mosey and take your compliance efforts to the next level.

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