Corporate Resolution Definition

Sometimes, an individual will need to get written permission to be able to make big decisions for a corporation. There are several ways that an individual can get that permission, and a corporate resolution is one of them. But what exactly is a corporate resolution? This guide explains what a corporate resolution is, the advantages and disadvantages of this corporate action, and more.

What is a corporate resolution?

A general corporate resolution is an agreement between agents or owners of a corporation to take on significant projects, make important decisions, or engage in certain activities. There are many reasons a corporation might enter into a corporate resolution. Examples include:

• To take on new financial responsibilities
• To change features of its shares
• To take on new liability
• To dissolve or merge the corporation

A corporation often enters into a written and signed resolution instead of having a shareholder meeting to approve a corporate action or decision. Typically, the board of directors enters into the resolution, but some laws require shareholders to enter a resolution for certain actions. The number of shareholders or corporate agents necessary for a valid resolution depends on state-specific laws. 

Entering a Corporate Resolution: The Advantages

Corporate resolutions give corporations the flexibility to make decisions they didn’t anticipate at formation.

A corporation is a very formal legal entity with more rigid rules of operation than other business structures. Without having a shareholder meeting, there aren’t many moves a corporation can make outside of the rules it wrote in its articles of incorporation (its formation document) or bylaws. Corporate resolutions allow corporations to engage in activities that aren’t covered in their articles of incorporation or bylaws. Without entering a corporate resolution, a corporation could be vulnerable to a lawsuit from its shareholders.

Entering a Corporate Resolution: The Disadvantages

A drawback of entering a corporate resolution is that it can be time-consuming. Under some state laws, the corporate board of directors has to enter into a resolution about a matter before presenting it to the shareholders for a vote. That’s a lot of steps to make a decision! But without specific rules in the corporation’s Bylaws or Articles of Incorporation, a corporate resolution might be the only way to engage in new activities. 

A corporate resolution can help a business move in a new direction

A corporate resolution is a tool that allows a corporation to make decisions that are outside of its formation documents and bylaws without having a meeting. In some cases, a corporation’s bylaws or articles of incorporation might require a corporate resolution before shareholders can vote on a business matter. What makes a resolution valid and when it’s required depends on state law and the corporation’s bylaws. 

ZenBusiness Can Help

Every entrepreneur wants to keep their corporation running as smoothly as possible. ZenBusiness has the tools to help make that a reality. Their corporation formation service helps entrepreneurs start a corporation quickly and easily. Once the company is up and running, ZenBusiness has a variety of business support services to help keep it running well. ZenBusiness Money Pro makes it easy to manage business finances, and the Worry-Free Compliance Service helps entrepreneurs rest easy knowing that their business is complying with state maintenance requirements.