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Missed our last feature article? After You Form Your LLC

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You and your partners formed the LLC and signed an operating agreement. The next step is usually a bank account, and that is where a missing document trips owners up. Before it opens the account, the bank wants proof of which agreement governs and who is authorized to act on it. That proof is a one-page resolution, and in a new multi-owner company it's the document most often skipped.

A resolution is the company putting a decision in writing. Our earlier piece, The Initial Resolution You Need After LLC Formation, covers the base version for a single owner. When you have partners, the same one-pager carries more weight, because it settles questions that come up only when more than one person owns the company.

The first job is to fix the operating agreement in place. It states that the version attached to the resolution is the official and complete operating agreement as of the date the members signed. The second job is to authorize a bank account and name the member (or members) who can open and manage it.

Formation produces drafts. You mark-up multiple drafts, a partner asks for changes, versions go back and forth over email, and eventually everyone signs. More and more, that signing happens in counterparts or through a digital service, with each member signing a separate copy on a separate screen. That makes it easier than ever to end up unsure which file is the complete, fully executed version. Two years later a disagreement surfaces over the profit split or a buyout term, and someone produces a draft that reads differently from the one you remember adopting. Now you're arguing about the document whose job was to end the argument. The resolution closes that gap: it attaches the executed operating agreement and records that this is the version the members adopted, as of a specific date. Our earlier piece, Your LLC Is Missing Its Most Important Document, covers what belongs in that agreement; the resolution is what proves which copy of it governs.

When you open an account for a multi-owner LLC, the bank wants more than your name and your EIN. It will ask for your articles of organization, the operating agreement, and identification for each member who holds 25 percent or more of the company. Whether it also wants a separate resolution depends on the bank. Some accept the operating agreement alone when it names who may open accounts; many want a standalone resolution authorizing the account and naming who can sign. Bringing both means you open the account in one visit instead of two.

Fill in the company name, the state of formation, and the dates. Name the member authorized to open and manage the account. Attach the operating agreement behind the resolution, and make sure it's the final signed version with every counterpart or digital signature page included. Have the members sign in whatever way your operating agreement requires, whether that is all members, a majority, or a managing member. Then file it as the first entry in your Company’s governance records, kept with the operating agreement and, if you have partners, your membership interest ledger. Our earlier piece, Your LLC Membership Interest Ledger, shows what that ledger should contain.

The next time a partner asks which draft of the operating agreement was the final one, you answer by pointing to the resolution and the version attached.

Our Multi-member Initial Resolution is one of over thirty, professionally prepared templates in our ever-expanding Premium Template Library. To obtain it and the others, simply upgrade your free subscription to Premium by clicking here.

The Co. Letter is not your attorney. This article provides general information, not legal advice. Laws and bank requirements vary by state and by institution. Consult a licensed attorney before adopting any resolution for your company.

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