Create a Banking Resolution Online

A banking resolution is not merely a formality — it is a critical governance document that serves multiple important purposes for your business.

Opening business bank accounts: Every bank requires a banking resolution to open a business checking, savings, or money market account. The resolution provides the bank with the legal authority to accept the account application and designate authorized signatories. Without this document, your business cannot maintain separate financial accounts, which is essential for maintaining the corporate veil and proper accounting.

Defining financial authority: The banking resolution precisely defines the scope of each representative's authority. Some representatives may be authorized only to make deposits and write checks up to a certain amount, while others may have broader authority to negotiate loans, pledge assets, or enter into complex financial transactions. This tiered authority structure protects the business from unauthorized commitments and gives the bank clear guidelines for which transactions to approve.

Protecting the corporate veil: For LLCs and corporations, maintaining proper corporate formalities — including banking resolutions — is essential to preserving the liability protection these entities provide. If a business fails to maintain proper documentation of its financial authorities, a court could "pierce the corporate veil" and hold individual members or shareholders personally liable for business debts. A properly executed banking resolution demonstrates that the business is operating as a legitimate separate entity.

Facilitating signatory changes: When employees or officers leave the company, or when new personnel need banking access, the banking resolution provides a clear process for updating authorized signatories. Rather than creating an entirely new banking relationship, the company can adopt a new resolution updating the authorized representatives. This ensures continuity of banking operations while removing access for departed personnel.

Supporting loan and credit applications: When a business applies for a loan, line of credit, or other financing, the lender will typically require a banking resolution authorizing specific individuals to negotiate and execute the loan documents. The resolution demonstrates that the borrowing has been properly authorized by the company's governing body, reducing the lender's risk and facilitating the approval process.

A comprehensive banking resolution contains several essential elements that establish its validity and ensure the bank can rely on it as authorization for financial transactions.

• Company identification: The full legal name of the business entity, its state of formation, and its entity type (LLC or corporation). This information must match the company's formation documents exactly, as any discrepancy could cause the bank to reject the resolution.
• Bank identification: The name of the financial institution where the company will maintain its accounts. Some companies maintain accounts at multiple banks and may need separate resolutions for each institution.
• Authorized representatives: The names and titles of each individual authorized to act on behalf of the company in banking matters. The resolution should clearly identify each representative and specify their role within the organization. Most banking resolutions allow for multiple authorized representatives, which provides operational flexibility.
• Binding requirements: The number of representatives required to authorize or bind the company on any given transaction. Some companies require dual signatures for transactions above a certain threshold, while others allow any single authorized representative to act independently. This requirement should be clearly stated in the resolution.
• Financial authorities: The specific types of banking activities the authorized representatives may conduct. Common authorities include opening and closing accounts, making deposits and withdrawals, signing checks, negotiating loans, incurring indebtedness, acting as guarantor, pledging securities, and conducting foreign currency transactions. Each authority should be explicitly granted or denied.
• Document date and signatures: The date the resolution is adopted and the signatures of the authorized representatives. The document date establishes when the authority becomes effective, and the signatures confirm that the named representatives acknowledge their authorization.

A banking resolution typically addresses nine specific categories of financial authority. Understanding each category helps businesses make informed decisions about which powers to grant their authorized representatives.

Authority to incur indebtedness: This grants representatives the power to borrow money on behalf of the company, including taking out loans, establishing lines of credit, and creating other debt obligations. This is a significant authority that most companies limit to senior officers or require multiple signatories.

Authority to act as guarantor or surety: This allows representatives to pledge the company's assets or creditworthiness to guarantee the debts or obligations of another party. Because guarantor obligations can expose the company to substantial liability, this authority is typically granted cautiously and may require multiple approvals.

Authority to subordinate amounts or debts: This permits representatives to agree to subordinate the company's claims or debts to those of another creditor. Subordination agreements affect the priority of the company's claims in the event of a default or bankruptcy and should be granted only to representatives who understand the implications.

Authority to encumber property as security: This allows representatives to pledge company property (real estate, equipment, inventory, accounts receivable) as collateral for loans or other obligations. Since this authority can put company assets at risk, it is typically limited to the most senior representatives.

Authority to sell, assign, or pledge stocks and securities: This grants representatives the power to manage the company's investment portfolio, including buying and selling stocks, bonds, and other securities. Companies with significant investment holdings may need this authority for their treasurer or CFO.

Authority for foreign currency, bond, and swap transactions: This permits representatives to engage in international financial transactions, including currency exchange, bond trading, and interest rate or currency swap agreements. This authority is most relevant for companies with international operations or sophisticated treasury management.

Authority to draw, endorse, and discount drafts and notes: This allows representatives to create and manage negotiable instruments such as promissory notes, drafts, and bills of exchange. This is a fundamental banking authority needed for day-to-day financial operations.

Authority to appoint further representatives for credit lines: This grants representatives the power to designate additional individuals who can draw on established credit facilities. This delegation authority provides operational flexibility but should be limited to prevent unauthorized access to credit.

Authority to enter instruments with waiver provisions: This permits representatives to sign financial instruments that include waivers of certain rights (such as presentment, demand, protest, or notice of dishonor). These waivers are common in commercial lending and negotiable instrument transactions.

While the core purpose of a banking resolution is the same regardless of entity type, there are important differences between banking resolutions for LLCs and corporations that business owners should understand.

LLC banking resolutions: In a limited liability company, the banking resolution is typically adopted by the members (in a member-managed LLC) or by the managers (in a manager-managed LLC). The resolution authority derives from the LLC's operating agreement, which should specify how banking decisions are made and who has the authority to adopt resolutions. LLC banking resolutions may refer to "members" or "managers" rather than "directors" and should identify the company as an LLC rather than a corporation. Some banks have specific forms for LLC banking resolutions that differ from their corporate forms.

Corporation banking resolutions: In a corporation, the banking resolution is adopted by the board of directors at a properly convened meeting (or by written consent in lieu of a meeting). The resolution authority derives from the corporation's articles of incorporation and bylaws. Corporate banking resolutions typically follow a more formal structure and must comply with the corporation's governance requirements regarding notice, quorum, and voting. The resolution is certified by the corporate secretary, who attests that it was duly adopted.

Key differences: The primary differences relate to governance formality and terminology. Corporations generally require more formal adoption procedures (proper notice, quorum verification, recorded votes) than LLCs. LLC resolutions may use simpler language and less formal adoption procedures, depending on the operating agreement. However, both types serve the same fundamental purpose: authorizing specific individuals to conduct banking transactions on behalf of the entity.

Banks' requirements: Most banks accept either format, but some may have specific requirements or preferred forms for each entity type. Before preparing a banking resolution, check with your bank to see if they have a preferred format. Even if the bank provides its own form, a supplemental banking resolution adopted by the company's governing body can provide additional documentation of the authorization.

EIN and formation documents: Regardless of entity type, banks will typically require the company's Employer Identification Number (EIN) from the IRS, a copy of the formation documents (articles of incorporation or articles of organization), and the banking resolution. Having all these documents ready when opening an account will streamline the process.

Avoiding common mistakes when preparing a banking resolution helps ensure the document will be accepted by your bank and properly protects your business.

Not matching formation documents: The company name, entity type, and state of formation in the banking resolution must exactly match the information in your articles of incorporation or articles of organization. Any discrepancy — even a minor one like using "Inc." instead of "Incorporated" — can cause the bank to reject the resolution. Always verify the exact legal name before preparing the resolution.

Granting overly broad authority: Authorizing all representatives to exercise all financial powers without limitations can expose the company to unnecessary risk. Consider which authorities each representative actually needs for their role and limit their powers accordingly. For example, an office manager may need authority to make deposits and write checks but should not have authority to pledge company assets or negotiate loans.

Failing to update after personnel changes: When an authorized representative leaves the company or changes roles, the banking resolution should be updated promptly. An outdated resolution that still lists former employees as authorized signatories creates a security risk and may lead to unauthorized transactions. Establish a process for reviewing and updating banking resolutions whenever there is a change in personnel.

Not specifying binding requirements: Failing to clearly state how many representatives must approve a transaction can create confusion and disputes. Be specific about whether transactions require one signature, two signatures, or different numbers depending on the transaction amount. Clear binding requirements protect the company from unauthorized individual action.

Ignoring digital banking authorities: Modern banking increasingly involves online transactions, wire transfers, ACH payments, and mobile banking. Your banking resolution should address whether authorized representatives have authority to conduct electronic transactions, set up online banking access, and authorize wire transfers. Banks may require specific language in the resolution to enable digital banking services.

Using a generic template without customization: While templates provide a useful starting point, every banking resolution should be customized to reflect the specific needs and governance structure of the company. A resolution that does not accurately reflect the company's actual authority structure can create legal problems and may not be accepted by the bank. Review each section of the resolution carefully and ensure it accurately reflects your company's requirements.