What is a Banking Resolution?
By Kimberly Lekman, Esq. | Legally reviewed by J.P. Finet, J.D. | Last reviewed August 29, 2021
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A banking resolution is a document businesses create when they open a bank account. In this document, the members agree to their banking rights and responsibilities. This includes who can loan money and perform other banking functions.
Key Takeaways
- Board members of a corporation usually draft a banking resolution at their first board meeting.
- A Limited liability company (LLC) should also have a banking resolution. This simplifies the process of opening a bank account.
- Banks often require banking resolutions from companies. They serve as proof that the person opening a business bank account is authorized to do so.
- Some banks have a standard form that companies must use for their banking resolution.
Understanding Banking Resolutions
Before a bank opens an account in a company's name, they will likely require a banking resolution. It shows a bank that the person opening a bank account in a company's name is authorized to do so.
The banking resolution gives the bank important information about which members of a company are authorized to make important banking decisions. Typically, it will list who can make withdrawals, who can apply for loans, and who can write checks on behalf of the company.
The minimum requirements for this resolution will vary depending on the financial institution. Some banks have their own standard banking resolution template that companies must use. They often offer these forms for free.
Companies should be sure to update their banking resolutions regularly. When a member leaves the company, it is a good idea to promptly modify the banking resolution. This can help prevent disputes if a former member accesses a bank account.
Banking Resolutions for Corporations
Corporate board members agree on several corporate resolutions at their first board meeting. Corporations must create resolutions or written documentation of any major company decisions. This includes banking resolutions for the creation of bank accounts. These record keeping formalities are critical functions for corporations.
Keeping good records is essential so that corporations maintain their corporate status. This status gives liability protections that corporations do not want to risk losing. To make sure they are complying with bookkeeping requirements, corporate officers should check their state corporation laws.
Banking Resolutions for LLCs
LLCs are not required to create banking resolutions by law. But their operating agreement might require a banking resolution. Even if an LLC's operating agreement does not require a banking resolution, it can be helpful to have one. The resolution officially authorizes members to open a bank account, apply for loans, and make withdrawals in the company's name.
The banking resolution should include the following information:
- The LLC's name and address.
- The full names of the LLC members.
- Who can write checks for the LLC.
- Which members have authority to take out loans.
With a banking resolution in hand, an authorized member of an LLC is empowered perform any necessary banking tasks.
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