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Tampa Estate Planning Attorney > Blog > Business Law > The Power of the Corporate Resolution

The Power of the Corporate Resolution

Sometimes in smaller businesses or partnerships, formalities get overlooked. That may not create huge difficulties—certainly there is an advantage to the efficiency of a smaller company as opposed to the apparent bureaucracy and paperwork of larger companies.

But there are often some formalities that even the smallest of companies should try to observe when running their day to day business. One such formality is the oft-overlooked corporate resolution. This simple document can have significant long-lasting impact down the line for your company.

What is a Resolution?

In its simplest form, a resolution is just memorializing a decision that your business has made. It is putting to writing something that your business has opted to adopt. Resolutions can adopt overall corporate policy, such as “we will no longer purchase goods from overseas vendors,” to more intangible goals, such as “we will make all efforts to grow to a million dollar company next year.”

Although there are many forms that you can buy online that try to give you the proper form for a resolution, there is, in fact, no proper or improper way to do it. As long as the resolution is complete, comprehensive and clear, no official legal form or legal language is needed.

Why a Resolution?

You may wonder why you need to write corporate decisions down, especially if you happen to be the owner, boss, CEO and manager all in one, or if you share that role with 1-2 other people. But there are advantages to writing down your resolutions:

  • Tax reasons – If you want money to be treated a certain way for tax purposes, it’s vital that you have a resolution saying as much. For example, many small business owners give loans to their businesses. A resolution will both document your personal expenditure as a loan, as well as document the money as debt for the company, to ensure both get proper tax purposes.
  • Successors – As time goes on, you may take on additional investors or owners. Having a paper trail of the company’s decisions can avoid confusion or ambiguity. Resolutions allow investors to see exactly where the company is going, and what it’s prior decisions have been, before they get involved.
  • Authority – A resolution can allow others to have authority to act on behalf of your business. For example, you may want to provide someone the authority to open and withdraw money on corporate accounts, or enter into deals with vendors. A resolution will demonstrate to those institutions that the person they are dealing with has authority to act on behalf of the company.

How a resolution is passed depends on the setup of your particular company. It may need approval of a board of directors, of partners, or just you, as the owner. Make sure that you are passing your resolutions properly. If so, they can go a long way towards protecting your company, being organized, and avoiding legal problems.

Running your business properly may entail more than you think at first. Contact Tampa business attorney David Toback to discuss your needs and discuss how to make sure that your business is doing all that it can do to avoid problems later on.

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