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A Board’s Resolve to Act: Corporate Resolutions

Your Personal Resolutions vs. Corporate Resolutions

So we are midway through January 2019 as of this post. How are your New Year’s Resolutions coming along? Are you preparing for your 2018 tax returns? Government shutdown or no the IRS will still be collecting taxes, so that’s always a struggle. In particular keeping your accounting and records in order to help yourself or your accountant.  So working on your taxes and helping out your accountant, whether you own a business or not, may be a personal resolution.

If you are responsible for a corporation’s records you probably want to make it a personal goal to make it the corporation’s goals to be prepared and organized for corporate meetings and docs.

For businesses though, another issue they may struggle in trying to do better each year is in their record keeping. Particularly, a problem acute to corporations, is documenting a corporate board’s decision-making process. Sometimes for corporate compliance concerns documenting the board’s decisions is crucial. It might be what is at issue in an IRS audit or an investigation by a licensing/permitting government agency.

From following the Articles of Incorporation, By-laws, calling meetings, setting agendas, sending notice, etc … there is a lot of keep track of for corporate formalities. One of the important documents in the corporate governance and record keeping process is the corporate resolution.

Understanding Corporate Resolutions

Corporate resolutions should be stored with other records like minutes.

Good record keeping, including documenting resolutions is key for corporate governance and compliance.

So what is a corporate resolution exactly? Corporations are legal persons. While, they are not living, breathing people like you and me they are persons under the law. They can own property, sue others, and be sued themselves. However, in order to do something, that is take action, corporation’s have boards that make decisions. In that way, corporate resolutions are like personal resolutions. Where you are resolved to accomplish something, like eat better or exercise more, a corporation is resolved to take out a loan or buy a piece of property.

For more information on corporate resolutions download and read the following One-Sheet. It is meant to answer the basic questions of corporate resolutions: ONE-SHEET: WHAT ARE CORPORATE RESOLUTIONS?

Many corporations spend a lot of money on their corporate formalities and governance items, such as:

  1. Proper notice and running of meetings;
  2. Timely annual filings and tax returns;
  3. Well-draft resolutions and minutes; and
  4. Documenting decision-making processes.

With so many stakeholders interested in corporate actions, such as shareholders, directors, officers, executives, IRS agents, licensing boards, regulators, environmentalists, and social activists corporate resolutions are just one of the many records that need to be maintained.

Resolutions Used in Other Organizations

Other organizations also use resolutions.

A variety of organizations and associations also use resolutions. They just do not call theirs “corporate resolutions”.

Finally, realize that for-profit corporations’ boards are not the only boards that should be documenting their actions and decision-making. That is resolutions are not only for them. Consider these situations:

  1. legislative bodies, their committees, and boards/agencies showing how they met and discussed the passing of laws or changing of regulations;
  2. nonprofit boards should avoid self-dealing, conflicts of interests, and the like as certain actions may be perceived abusing their charitable and tax exemption status for 501(c)(3) corporations, thus answering inquiries by the IRS and state regulators;
  3. homeowners’ and condo association boards where the decision to implement house rules, policies, and/or improvements could be challenged by owners or by injured parties for liability purposes; and
  4. yes, even LLCs and partnerships may use resolutions, they just do not call them “corporate resolutions”.

Resolutions in general are just a document of an action to be taken. Whether they pass or not a corporate board is something else. Corporate resolutions is just one of the tools in the corporate governance and compliance process. So anyone forming a corporation, serving as an officer/director, or becoming a shareholder should familiarize themselves with corporate records.  If your new to proper corporate governance and drafting of resolutions, then you may want to consider a lawyer’s help.

Finally, for your personal resolutions good luck!

-RKH

DISCLAIMER: This post provides general information, but does not constitute legal advice in any respect.  No reader should act or refrain from acting based on information contained in the post without seeking the advice of  an attorney in the relevant jurisdiction.  Hew & Bordenave, LLLP expressly disclaims all liability in respect to any actions taken or not taken based on the contents of this post.

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