How Corporate Resolutions Can Help Your Business

In the course of running your business, you make a lot of decisions. Some you make on your own, and some may be made with the approval of officers, shareholders or board members. But do you write down on paper, all of the official decisions that your company makes? You may not–but you should.

That’s because any time there is an official decision That will affect your company, you should memorialize the decision in the form of a corporate resolution.

What are Resolutions?

Resolutions can be drafted for a wide range of things. They can include major changes, like a change of direction and mission for the company, decisions to expand, or to file or defend lawsuits. They can also be relatively minor, like decisions to alert company policies or procedures, or to change vendors, or to handle accounting duties differently.

Resolutions can even be intangible, like simply a goal to “have more offices,” or to “provide better customer service.”

Resolutions are not the end of the paperwork or implementing your decisions in full. They aren’t meant to replace actual policies and procedures, or bylaws, or operating manuals. But they are a start, and give guidance to how, if, and when those kinds of documents will eventually be drafted and what they will say.

Why Resolutions?

Smaller companies may wonder why they should even bother to memorialize decisions in the form of corporate resolutions. But doing so can have a number of advantages for your business.

Lawsuits – Corporate resolutions can prove what your company did or did not intend to do or act, in the event of a lawsuit. Resolutions can limit the authority of employees or third parties to bind your company to legally risky agreements and contracts. They can show the court that you had, for example, a sexual harassment policy, or an IT privacy policy. They also put all employees on notice about what the company allows and doesn’t allow, clearing up ambiguity, and thus avoiding potential legal liability.

Paper trail and successors – When you are gone, whoever replaces you will want to know what the company has done, and what its policies may have been. Resolutions provide a paper trial; they are not all that is needed to show a successor how to run your business, but they can be a big help.

Taxes – Sometimes, money is used by the business–spent, made, loaned, or invested–and you want it to be clear how the money was being used for tax purposes. A resolution can show the IRS how you intended to use your money, in ways that are more tax advantageous to you.

In many cases, your company’s bylaws will say how resolutions must be passed. You may have the authority to pass them unilaterally, or you may need to get approval from directors or shareholders. Either way, you should ensure that your resolutions are passed properly.

Call our Fort Lauderdale business law lawyers at Sweeney Law P.A. at 954 440-3993 for help running your company legally and safely.

Sources:

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