Learn more about what a corporate resolution is in business.
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There are many ways to get the authority to make big decisions for your corporation. A corporate resolution is one of them. What does this corporate action involve? Read on for a brief and general summary of the corporate resolution definition.
The general corporate resolution definition 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:
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 your state’s law.
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, your corporation could be vulnerable to a lawsuit from its shareholders.
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 your corporation’s Bylaws or Articles of Incorporation, a corporate resolution might be the only way to engage in new activities.
A corporate resolution is a tool to allow 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.
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Disclaimer: The content on this page is for informational purposes only and does not constitute legal, tax, or accounting advice. If you have specific questions about any of these topics, seek the counsel of a licensed professional.