How to Create a Banking Resolution for Your LLC

Learn to create a banking resolution for your LLC. Our guide covers LLC banking resolutions to help you manage your business banking efficiently and compliantly.

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Sarah Jameson
Senior Editor

Introduction to Banking Resolutions for LLCs

A banking resolution for an LLC is a formal document authorizing designated individuals to manage the entity’s bank accounts. It typically includes:

  • The LLC’s name and address

  • The names of authorized signatories

  • Specific powers granted to each signatory

  • The date when the resolution was adopted

The resolution is essential for:

  1. Opening new bank accounts

  2. Adding or removing authorized signatories

  3. Ensuring compliance with the bank’s requirements

Proper drafting ensures that the LLC’s financial transactions are legally binding and efficiently managed, thereby avoiding potential conflicts or misunderstandings.

Importance of a Banking Resolution for Your Business

A banking resolution is essential for an LLC because it establishes a formal, professional approach to handling banking activities. This document, signed by members or managers, is required by financial institutions to:

  • Authorize individuals to open and manage bank accounts

  • Ensure clear decision-making authority

  • Prevent unauthorized access to company funds

  • Protect the LLC and its members from potential fraud

  • Comply with legal and regulatory requirements

By defining who has authority, a banking resolution bolsters internal controls and enhances the LLC’s credibility with financial institutions. It is a critical document for smooth, transparent business operations.

For an LLC to create a banking resolution, certain legal requirements must be met. These often include:

  1. LLC Formation Documentation: Ensure all foundational LLC documents are in order.

  2. Operating Agreement: Review the operating agreement for any necessary provisions.

  3. State Compliance: Verify compliance with the specific requirements of the LLC’s state of incorporation.

  4. Board Approval: Secure board approval for the banking resolution.

  5. Authorized Signatories: Clearly identify authorized signatories in the resolution.

Legal counsel may be required to ensure compliance with federal, state, and local regulations. Each jurisdiction may have unique requirements.

Gathering Necessary Information

Before drafting the banking resolution for an LLC, gather all relevant details to ensure completeness.

  1. LLC Documentation:

    • Obtain the LLC’s Articles of Organization.

    • Collect the Operating Agreement.

  2. Member Information:

    • List all members and their ownership percentages.

    • Identify the authorized signatories.

  3. Banking Details:

    • Gather the bank’s name and branch details.

    • Acquaint with the bank’s specific requirements.

  4. Resolution Specifics:

    • Decide on the type of accounts to be opened.

    • Define the extent of transaction authority.

  5. Legal Advice:

    • Ensure compliance with state laws.

    • Consult with an attorney if necessary.

Drafting the Banking Resolution

Drafting a banking resolution involves several key steps:

  1. Identify the LLC: Include the legal name of the Limited Liability Company.

  2. Specify the Purpose: Clearly state the purpose of the resolution, which is to open and manage a bank account.

  3. Authorize Actions: Detail the specific actions authorized, such as signing checks or accessing online banking.

  4. Appoint Authorized Signers: List individuals authorized to conduct transactions on behalf of the LLC.

  5. Include Signatures and Dates: Ensure signatures of authorized members and the date of approval are included.

  6. Add Notary Public: If required, include a section for notarization to validate the document.

Components of a Comprehensive Banking Resolution

1. Title and Preamble

  • Title: Clearly state that the document is a Banking Resolution.

  • Preamble: Identify the LLC’s name and principal place of business.

2. Authority

  • Statement of Authority: Detail who has the authorization to make banking decisions.

  • Scope: Outline the extent of authority, including specific transactions and limitations.

3. Banking Relationships

  • Approved Financial Institutions: List the banks where accounts will be maintained.

  • Types of Accounts: Specify account types, such as checking, savings, or credit.

4. Authorization of Actions

  • Signer Designation: Name individuals authorized to sign checks and documents.

  • Transaction Limits: Indicate maximum transaction amounts without further approval.

5. Adoption and Ratification

  • LLC Member Approval: Include a statement confirming unanimous member consent.

  • Effective Date: Mention the date when the resolution becomes active.

Role of Members and Managers

In an LLC, members and managers have distinct responsibilities related to banking resolutions.

  • Members:

    • Hold ownership interests.

    • Vote on crucial decisions.

    • May need to approve the banking resolution.

  • Managers:

    • Handle daily operations.

    • May be designated to execute documents.

    • Authorized to open bank accounts and perform transactions.

Members and managers should collaborate to ensure the banking resolution accurately reflects the operating agreement. Proper alignment of roles clarifies decision-making authority and streamlines banking activities, safeguarding the LLC’s financial integrity.

The clarity of roles is paramount to effective and compliant LLC management.

Approval Process and Voting Procedures

The LLC members must follow a structured approval process to create a banking resolution. Steps include:

  1. Review Proposed Resolution: Each member must thoroughly examine the drafted resolution.

  2. Hold a Meeting: A formal meeting must be convened where the resolution is discussed.

  3. Voting: Members vote on the resolution during the meeting. Voting can be carried out via:

    • Show of Hands: Common in smaller LLCs.

    • Ballot: Written votes ensure privacy.

  4. Majority Decision: Generally, a simple majority is required for approval.

  5. Document the Outcome: Record the decision in official meeting minutes and distribute to all members.

Finalizing and Filing the Banking Resolution

  1. Review for Accuracy: Ensure all information, especially LLC name, owner details, and bank information, is correct.

  2. Obtain Signatures: Collect signatures of members and managers as required. This legitimizes the document.

  3. Keep Copies: Retain a copy for corporate records. This aids in compliance and reference.

  4. Submit to Bank: Provide the executed resolution to the bank. Meeting bank guidelines will avoid delays.

The banking resolution, once filed, formally authorizes the designated individuals to manage the LLC’s bank accounts. This is a crucial step.

Maintaining and Updating Banking Resolutions

To maintain and update banking resolutions, LLCs should:

  1. Annual Review: Conduct an annual review to ensure the banking resolutions reflect current authorization and decision-makers.

  2. Document Changes: Record any changes in a formal meeting and document them in the minutes.

  3. Update Signatories: Regularly update the bank with new signatories and remove former authorized persons.

  4. Compliance: Ensure that all changes comply with both the LLC’s operating agreement and state laws.

  5. Notification: Promptly notify the bank of any amendments to the resolution.

  6. Record Keeping: Maintain meticulous records of all banking resolutions and updates.

Each update should be formally adopted by the LLC’s members or managers and submitted to the bank for validation.

Best Practices for Effective Banking Resolutions

  1. Clear Title: Ensure the resolution has a clear and concise title to avoid confusion.

  2. Accurate Information: Include exact names, roles, and addresses of all members and authorized signatories.

  3. Specific Powers: Clearly define the specific powers granted to each designated person.

  4. Legal Compliance: Ensure the resolution complies with both state laws and the LLC’s operating agreement.

  5. Review Periodically: Regularly review and update the resolution as roles and responsibilities within the LLC change.

  6. Proper Documentation: Maintain proper documentation and keep records of all banking resolutions.

  7. Board Approval: Ensure all decisions are approved by the LLC’s board and recorded in meeting minutes.

Common Pitfalls and How to Avoid Them

Creating a banking resolution for an LLC can be straightforward, but several common pitfalls can complicate the process. Below are key pitfalls and how to avoid them:

  • Inaccurate Information: Ensure all member names and titles are correct. Double-check information to prevent errors.

  • Missing Signatures: Obtain signatures from all necessary members and managers to validate the resolution legally.

  • Not Reviewing State Laws: Confirm compliance with specific state requirements for banking resolutions to avoid legal issues.

  • Vague Language: Use clear, precise language to prevent ambiguity in the resolution.

  • Ignoring Bank Requirements: Consult with the bank to understand their specific documentation needs.

Sample Banking Resolution Template

A sample banking resolution template offers a structured format. Essential components include:

  1. Title: “LLC Banking Resolution”

  2. Date: Date of resolution implementation

  3. LLC Information:

    • Name of LLC

    • Principal address

  4. Resolution Details:

    • Authorization of persons to open and manage accounts

    • Specific banking actions authorized

  5. Authorized Signatures:

    • Names and titles of authorized members
  6. Certification:

    • Statement certifying authenticity and approval by LLC

Note: Tailor the template to suit specific business needs. Use legal counsel to ensure accuracy and compliance.

Conclusion and Next Steps

Once a banking resolution for the LLC is drafted and approved, the authorized individuals need to submit this document to the bank. The bank will require identification documents and possibly an operating agreement. The LLC members should:

  1. Ensure all members agree on the resolution and have signed it.

  2. Gather necessary identification documents.

  3. Submit the resolution and identification documents to the bank.

  4. Communicate with the bank to confirm the account setup and terms.

Proper documentation not only streamlines banking operations but also provides legal safeguards for the LLC’s financial transactions.

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