Resolution Definition

At some point, most business owners have heard the word “resolution.” After all, most people have heard the term in the context of New Year’s resolutions. But what does “resolution” mean in a business context? This guide covers the essential facts that business owners need to know about corporate resolutions.

Definition of Corporate Resolution: What Entrepreneurs Need to Know

Small business owners have a seemingly endless list of things they need to know. If an entrepreneur owns a corporation, that list includes resolutions. Thankfully, the strict definition of a resolution is pretty straightforward: a resolution is a formal decision that’s been approved by the company’s board of directors (or shareholders). Typically, resolutions address important decisions or company changes.

That’s the basics, though. Here are some other important considerations to keep in mind.

General Resolution Definition vs. Resolution Business Definition

First and foremost, it’s important to recognize that a company resolution is different from the standard definition of a resolution. 

According to Merriam-Webster, a resolution is “the act or process of resolving” something. While a similar idea at its core, a corporate resolution is something more specific. A corporate resolution refers to an official confirmation of a proposed action or decision made by the board of directors on behalf of the company. The document confirming this decision reflects a binding decision that usually deals with major company issues like voting in new board members, issuing more stock, getting loans for the company, or changing ownership. 

Company Resolution Process, Procedures, and Considerations 

Generally speaking, a corporate resolution starts with a proposal to take a particular course of action. Next, a vote is taken at a board meeting. Voting members will typically be shareholders or members of the Board of Directors. If there are a sufficient number of votes to pass the resolution, the requisite individuals will sign the formal document, thereby making the resolution an official and binding company action. 

That said, individual businesses will have specific procedures and requirements that affect how the resolution procedures go. A business owner will likely need to check their governing documents before attempting to pass any resolutions.

Corporate Resolution Examples

There are several scenarios where a new resolution might be needed for a corporation:

• Make changes to corporate governing documents
• Approve the hiring or firing of an employee
• Approve a new board member
• Document a shareholder decision
• Approve the selling of shares or other company property
• Expand the business
• Approve raises and executive compensation
• Revise corporate management structure or policies
• Open new corporate bank accounts or take on additional business loans and other debts

Again, these situations vary from one corporation to the next. For instance, some companies won’t need a resolution to hire or fire employees. It’s prudent for business owners to double-check their company’s governing documents before making a resolution.

Business Resolution Definition Recap

In short, a corporate resolution is a legal document detailing and confirming a formal decision made by the board of directors. However, the process and requirements for approving a resolution may vary depending on a business’s particular rules and regulations. Thus, business owners will likely need to check their governing documents before approving a resolution for their companies.

ZenBusiness Can Help

There’s no question that running a business is hard work. Fortunately, small business owners don’t have to navigate the process alone. ZenBusiness can help with a lot of business tasks, including forming a corporation and keeping it compliant. They have a long list of products and services designed to help new companies succeed at any stage of the game, including starting, managing, and growing a business.