LLC Resolution vs Operating Agreement
Having a written record of decisions avoids legal disputes and reduces confusion because all members know what is expected and the legal guidelines to be followed.
An LLC operating agreement is a document that customizes the terms of a limited liability company according to the specific needs of its members.
Litigation resolves disputes between parties in Court. An operating agreement will identify the proper forum. Members should consider their expectations for dispute resolution – whether they want negotiation before mediation, arbitration, or litigation as the final binding process, and timelines for each step.
Managerial Resolutions are made by LLC managers, involve day-to-day operations, financial transactions, and other managerial responsibilities. Financial Resolutions cover matters related to finances like opening bank accounts, loans, budgets etc.
Entity Resolution of an LLC
An LLC resolution documents decisions by LLC members and company actions taken.
Banks may require an LLC resolution before allowing company funds to be accessed to confirm who can conduct banking transactions.
The documents that define the operational and managerial structure of an LLC are called operating agreements, not resolutions.
An operating agreement customizes the terms of an LLC for its members. Once signed, it acts as a binding contract dictating how the LLC must operate. Most states don’t mandate operating agreements but they remain important governance documents.
Disputes between LLC members can be resolved through negotiation, mediation, arbitration or litigation. An operating agreement will identify the proper forum and timeline for each step of dispute resolution.
Following operating agreement procedures when making major decisions or facing significant financial risk is wise, even if resolutions aren’t mandatory. Documenting votes with member signatures, both for and against, validates resolutions.