An LLC member resolution is a written record of a significant decision approved by the members of a limited liability company. While LLCs are known for operational flexibility, they are still legal entities that must demonstrate proper governance. Documenting major decisions helps preserve liability protection, reduce internal disputes, and provide evidence of authority to third parties.
Unlike corporations, which are required to adopt formal board resolutions, LLCs operate under state statutes and their own operating agreements. Even when not legally mandated, written resolutions serve as proof that members acted with consent and in accordance with agreed procedures.
When Member Resolutions Are Necessary
Many LLC owners assume resolutions are only required for corporations. That is incorrect. While state laws often allow flexibility, certain actions should always be documented through written member consent or formal meeting minutes.
Common situations that require an LLC member resolution include:
Admitting or removing a member
Amending the operating agreement
Approving a merger or conversion
Authorizing large loans or lines of credit
Purchasing or selling substantial assets
Electing S corporation tax status
Dissolving the company
Banks, investors, and title companies frequently request a copy of a member resolution before proceeding with financing or real estate transactions. Without written authorization, the company may face delays or legal challenges.
Legal Framework Governing LLC Decisions
LLCs are governed primarily by state statutes and their operating agreements. For example, in states such as Delaware, the Delaware Limited Liability Company Act allows members to structure decision making processes contractually. Other states follow versions of the Uniform Limited Liability Company Act.
If the operating agreement specifies voting thresholds for major actions, those terms control. If the agreement is silent, state default rules apply. Many states require unanimous consent for certain actions, such as admitting a new member, unless the agreement states otherwise.
Failure to follow these procedures can expose the company to internal disputes and potential claims of breach of fiduciary duty.
Written Consent Versus Formal Meetings
LLC member resolutions can be adopted in two primary ways:
Through a formal meeting with recorded minutes
Through written consent without holding a meeting
Written consent is often more efficient, especially for small LLCs with few members. However, the operating agreement may outline notice requirements, quorum rules, or documentation standards. Ignoring those provisions undermines the validity of the decision.
For multi member LLCs with complex ownership structures, formal meetings provide clarity and reduce misunderstandings.
Key Elements of a Valid LLC Member Resolution
A well drafted resolution should contain:
The legal name of the LLC
The date of the resolution
A clear description of the decision being approved
Reference to the authority under the operating agreement
The voting outcome or written consent confirmation
Member signatures
Ambiguity is a common mistake. Vague language such as approving a financial transaction without identifying the lender, loan amount, or terms can create problems later. Precision protects the company.
Real World Example: Bank Loan Authorization
Consider a two member LLC seeking a commercial loan. The bank requires documentation showing that both members approved the borrowing and authorized one member to sign the loan documents.
A proper member resolution would:
Approve the loan amount and lender
Authorize a specific member to execute documents
Confirm the vote or written consent
Be signed and dated by all required members
Without this documentation, the lender may refuse to close or question the signing authority.
Misconceptions About LLC Formalities
A common belief is that LLCs have no formal record keeping requirements. While they are less rigid than corporations, courts still evaluate whether members respected the separation between personal and business affairs.
Poor documentation can weaken liability protection in litigation. If members cannot show that major decisions were properly approved, plaintiffs may argue that the LLC was not operated as a distinct entity.
Resolutions are part of maintaining good governance, along with separate bank accounts, proper accounting, and compliance filings.
Storage and Record Keeping Requirements
Most state laws require LLCs to maintain certain records at their principal office. These often include:
Articles of organization
Operating agreement
List of members and managers
Tax returns
Financial statements
Member resolutions should be stored with these records. Digital copies are acceptable in many jurisdictions, but maintaining signed originals is advisable for high value transactions.
Tax Elections and Member Resolutions
When an LLC elects to be taxed as an S corporation by filing Form 2553 with the Internal Revenue Service, the decision should be formally approved by the members. Although the IRS does not require a separate resolution filing, internal documentation demonstrates that the election was authorized.
Tax related resolutions are particularly important in multi member LLCs where profit allocation and compensation structures may change.
Dispute Prevention and Governance Benefits
Clear documentation reduces ambiguity. If a disagreement arises about whether a major action was approved, a signed resolution provides objective evidence.
This is especially important in family owned businesses or startups where informal communication is common. Written resolutions establish transparency and protect all parties.
In the absence of written records, disputes often become credibility contests, increasing legal costs and business disruption.
Practical Recommendations for LLC Owners
Review your operating agreement annually to understand decision making requirements.
Adopt written resolutions for any transaction that affects ownership, finances, or legal status.
Use specific and detailed language when authorizing actions.
Maintain a centralized record book, whether physical or digital.
Consult legal counsel when approving mergers, conversions, or complex financing arrangements.
Consistency in documentation strengthens credibility with lenders, investors, regulators, and courts.
Referenced Resources and Links
Internal Revenue Service Form 2553 Instructions
https://www.irs.gov/forms-pubs/about-form-2553
Delaware Limited Liability Company Act
https://delcode.delaware.gov/title6/c018/
Uniform Limited Liability Company Act Information
https://www.uniformlaws.org/committees/community-home?CommunityKey=c3f8b0c6-58dc-4c3a-9d77-3a7f8a7e7d5f
Internal Revenue Service Small Business and Self Employed Tax Center
https://www.irs.gov/businesses/small-businesses-self-employed