Running a small business involves continually learning new terms and how to do different tasks—many of which can seem intimidating at first, but are pretty simple once you take the time to learn them.
One such thing is the corporate resolution. A corporate resolution is basically a formal document that records the decisions made by your business’ board of directors.
But why exactly are corporate resolutions relevant?
How do you write one?
What type of information does a corporate resolution need?
Don’t worry, I’ve got you covered. Let’s take a look at what a corporate resolution is and how you can write one.
What is a Corporate Resolution?
Essentially, it is a formal document that serves as a written record of important decisions and actions made by your company’s board of directors. The point is to hold your business’ board of directors accountable for its decisions in case anyone tries to go back on a decision.
Also, a corporate resolution is necessary to show state and federal regulators that your company’s board is acting according to its fiduciary responsibilities, meaning the board is doing its best to make sure your company is profitable.
Not all of the board’s actions have to be recorded in a corporate resolution, though. Only things that will have a significant impact on the direction of the company need to be registered.
This could include things like:
✍🏽 Board membership changes
✍🏽 Issuing new shares
✍🏽 Acquiring new assets/companies
✍🏽 Buying back shares
✍🏽 Taking out new corporate loans
✍🏽 Expanding to a new state
On the other hand, day-to-day activities, like hiring new employees or taking on new clients, don’t need to be recorded in a corporate resolution.
What to Include in a Corporate Resolution
Corporate resolutions are legal documents that should follow a specific structure. Your state’s business services department decides the exact structure that your company’s corporate resolutions should follow, so be sure to look into your state’s requirements.
Although an effective corporate resolution should generally contain the following items:
- Your company’s legal name
- The date, time, and location
- The governing body responsible for making the corporate resolution (this is usually the board of directors)
- Title and purpose of the resolution
- Signatures of the person(s) designated to sign resolutions (typically the board chairperson)
- Details regarding any decision made during the meeting
- The state that the company was formed in
- A phrase stating if the board of directors agreeded upon the resolution and whether or not it was unanimous (if it is not unanimous, you have to record the number of ‘yay’ and ‘nay’ votes)
- A statement that explains the actions that the company will take
Corporate resolutions are meant mostly for internal use, you don’t need to file them with the federal government. That said, it should still be pretty detailed so that it is clear what was said and what the reached decisions in case the board needs to readdress the resolution.
How to Write a Corporate Resolution
If writing a corporate resolution seems a little intimidating, you’re not alone. Like writing a business plan, it can seem complicated if you’ve never done it before.
By following these steps, you can write a corporate resolution:
1. Formatting 📝
Format your resolution by putting the date, time, location, and resolution number at the top of the document.
For your first resolution, you can use a number like ‘0001’ to account for future resolutions.
You can also list the board members and other attendees that are present, but this is optional.
2. Title 📝
Your title should be clear and concise and should clearly indicate the purpose of the document.
For example, “Corporate Resolution by the Board of Directors at Company A to Acquire Company B.”
3. Company Legal Identification 📝
You should also be sure to include the detailed legal identification of the company.
For example, “Company A was incorporated in the State of California on Jan. 1, 2015.”
4. Resolved 📝
A corporate resolution should, of course, indicate all of the issues resolved during the meeting.
For example, “TO DISCUSS: That the Company will acquire Company B.” After which, you might write, “RESOLVED: The Company agrees to purchase Company B for $X.”
Every detail of the decision made during the meeting should be a separate paragraph and resolution.
You can also choose to indicate the details regarding each decision and the vote count for each decision.
5. Sign & Date 📝
Every corporate resolution should finish with a legal declaration of the accuracy of the resolution.
This declaration should be dated and signed by all necessary parties, which might include the chairperson of the board, treasurer, corporate secretary, vice-chairperson, or others.
That’s all there is to it! Essentially, a corporate resolution is a document stating the decisions made by your company’s board of directors, and when these decisions were made. By following these five steps, you can quickly write a corporate resolution.
Keep reading: Corp to Corp, what its and their benefits
Tips for Writing a Corporate Resolution
While writing a corporate resolution might seem complicated, it’s actually very straightforward and easy to get the hang of.
That said, there are a few tips that can make it easier to write an excellent corporate resolution.
- Internal or External Use? 📄
Corporate resolutions are often meant for internal use, but in some cases, corporate resolutions are needed by third-parties for certain business transactions.
Corporate resolutions written for external use should be simplified by as much as possible. In these cases, the third-party only needs to know that your company’s board is in agreement regarding the transaction. They don’t need all the details.
- Use a Template 📄
Corporate resolutions are essential documents. While they are simple documents, they are also legally binding, so it’s important to be careful when writing one.
The good news is that there are many corporate resolution templates available on most legal service websites. These templates are often perfect for standard resolutions and can save you a lot of time and effort.
- Be Concise 📄
Again, a corporate resolution is a legally binding document. As such, it’s essential to be clear and concise.
You can include details that you think may be important when looking back at the resolution, but do your best to avoid fluff. Your resolution mustn’t leave room for confusion.
It’s Your Turn to Write a Corporate Resolution
Corporate resolutions are vital documents in any corporation. Fortunately, while they might seem intimidating, learning how to write them is much easier than you probably thought.
By following the steps outlined in this article, you can quickly write a corporate resolution the next time your company makes a significant business decision.
Want to read more small business management advice and tips?
At Camino Financial, we strive to create a community where small business owners can come to learn more management tips, ideas, and ways to grow their businesses.
To meet this goal and live up to our motto, “No Business Left Behind,” we created a newsletter to make it easy to get more helpful business management information.
Subscribe to the Camino Financial Newsletter today to see how we can help you grow your small business!