Having a quorum is vital for the business decision-making process. So unless your small business is a sole proprietorship, you’ll need to understand what a quorum is and how it affects your operations. Read to learn more about the word “quorum,” including its meaning and a few examples.
The Merriam-Webster Dictionary’s definition of “Quorum” is “a select group.” Quorum’s business definition is “the number . . . of officers or members that when duly assembled is legally competent to transact business.” Put another way; a quorum is the minimum number of voting members that need to attend a meeting for the meeting to be effective. Without a quorum, the meeting is not legitimate, and the attendees can’t make binding business decisions.
Despite the unusual name, Americans encounter the concept of a quorum quite often. For instance, both the Senate and House of Representatives require a quorum to vote on bills. The Senate, which has 100 members, requires a quorum of 51 to conduct business. By contrast, the quorum for the House of Representatives varies. Depending on the situation, a quorum can be as few as 25 members or as many as 218.
The vast majority of LLCs, corporations, and even partnerships require a quorum to carry out business.
Conceptually, a quorum benefits a business by ensuring that all decisions are made fairly and democratically. If a company with a board of directors had no quorum, then any director could single-handedly call a meeting and make binding business decisions on their own.
A quorum’s main disadvantage is that it can prevent a company’s leaders or owners from taking rapid action. For example, if a company receives a time-sensitive business offer, it can be difficult for a sufficient number of directors or members to attend the meeting in time to respond.
Alternatively, if a company has a relatively small number of owners or directors, then it can be difficult to reach a quorum when one or two directors are unavailable or ill. However, you can make these two scenarios less likely by lowering the quorum.
A quorum is the minimum number of people needed to conduct business in a meeting. It helps ensure that the process of making business decisions remains democratic and representative of the company.
Learning about things like quorums is just the start of your business journey. It’s easy to feel overwhelmed by all of the new information that underlies the process of running a business. And you’ll also have to deal with significant paperwork and filing fees.
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Disclaimer: The content on this page is for information 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.