What is a Banking Resolution?
Obviously, not everyone can manage your business’s finances, but how does the bank know who’s authorized? Rather than just opening a bank account on a whim, business owners will need to specify who can act on behalf of their company. A banking resolution does exactly that. Let’s review some of the ins and outs of banking resolutions, what’s included in them, and how to make updates.
What is a Banking Resolution?
When a business opens a bank account or applies for financing, the bank often asks for a document called a banking resolution. A banking resolution is an official document that authorizes specific individuals to act on behalf of the business in banking matters. This includes opening and closing accounts, signing checks, handling wire transfers, and conducting other financial transactions. This document is often adopted by the members of an LLC or a corporation’s Board of Directors. During the first meeting for a business, it’s common to include a corporate resolution addressing who will be included in this document.
A banking resolution is formal proof to banks and financial institutions that the people named in the document have the authority to make financial decisions for the company. Without a banking resolution, banks may refuse to allow certain transactions.
Do I Need a Banking Resolution?
If your business has a bank account, you will likely need a banking resolution. Banks have a responsibility to protect both themselves and their customers. If a bank allows the wrong person to access a business’s financial account, it could lead to fraud, disputes, and legal problems for all parties involved. A banking resolution helps prevent these issues by creating a written record of authority. Without it, your bank may require other documentation for approvals. Below are a few of the most common scenarios where you’ll need to provide a banking resolution:
- Opening a 91自拍 Bank Account
- Changing Authorized Signers
- Applying for a Commercial Loan
- Making Significant Account Changes
Some smaller businesses or single-owner LLCs might operate without a banking resolution, but having one helps prevent confusion or delays with financial institutions.
Creating a Banking Resolution
Obtaining a banking resolution is a pretty straightforward process. However, depending on the type of business you run, the steps can vary slightly. Below is a short explanation for a few of the most popular business entities in Delaware:
- Corporation - Corporations usually have the most formal banking resolution process. Unlike other entity types, a corporation’s banking authority is typically approved by the board of directors and certified by the corporate secretary.
- Limited Liability Company (LLC) - The banking resolution process depends on whether the LLC is member-managed or manager-managed. In a member-managed LLC, the owners usually approve banking authority directly. In a manager-managed LLC, the appointed managers typically approve it.
- Nonprofit - For nonprofits, the banking resolution process usually has strong oversight and accountability concerns. Approval typically comes from the board of directors or trustees, but the resolution may include extra caveats, as the board must ensure that the financial setup serves the nonprofit's mission.
- Partnership - In a partnership, banking authority is usually based on the partnership agreement and the roles of the partners. In a general partnership, partners may have broad authority unless the agreement limits them. In a limited partnership, usually only the general partner controls banking decisions.
- Sole Proprietorship - Sole proprietorships have the fewest formalities for banking resolutions. Instead, the owner generally opens and controls the account personally. A formal resolution is often unnecessary unless the owner wants to authorize someone else to access the account.
What to Include in a Banking Resolution
A banking resolution document needs to be precise to give the bank all the necessary information. While there is no one-size-fits-all template, key details on the document typically include:
- The name of the business
- The name of the bank
- A list of authorized individuals
- The scope of their authority
- The date that the resolution is approved
Updating Your Banking Resolution
A banking resolution isn’t a one-and-done document. Over time, it may need updates as team members change and responsibilities shift. To update the resolution, the company should first review its governing documents, such as an LLC operating agreement or corporate bylaws, to confirm who has the authority to approve banking changes. Next, the members of an LLC or the Board of Directors of a corporation should hold a formal meeting to review and approve the changes. The updated resolution should mention the company, the bank, the accounts affected, the individuals being added or removed, and the specific banking powers being granted. Once the updated resolution is approved, it should then be documented in the company’s official records, and a new certified copy should be provided to the bank.
Banking Resolution Templates
When opening a business bank account, lots of banks will require a banking resolution, so it’s best to be proactive. To stay proactive, you can form your own banking resolution document by downloading and printing out one of our free templates:
Although most businesses will have their banking resolutions prepared before going to the bank, some banks will require you to fill out their own custom banking resolution template. Banks will vary in this respect, so try to get all the details you can when searching for a new bank. If you apply for a loan, the bank will keep the banking resolutions on file along with the Certificate of Incorporation/Formation, the bylaws/Operating Agreement, and other company formation documents.
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Banking Resolution FAQs
What is the purpose of a bank resolution?
A banking resolution formally documents who within a company has the authority to manage its banking activities. This document provides banks and financial institutions with the necessary proof of authority, thereby preventing fraud when someone attempts to open or close accounts, sign checks, initiate wire transfers, or perform other critical financial activities.
Where do I get a banking resolution?
You can create a banking resolution internally. There’s no single required format, and companies are generally free to draft the document in whatever structure makes sense for them. Your team can obtain one by drafting it from scratch or by using one of the free templates on our website, listed above. Just remember to include the authorized names and the scope of their authority.
How do banking resolutions differ for different entity types?
For LLCs, the resolution is typically approved by the members or managers, while for corporations, the Board of Directors formally adopts the resolution. Partnerships may require approval from all partners unless the partnership agreement states otherwise. While the content is similar across entity types, the approving body and signature requirements vary based on the company’s governance structure.
Need Help with a Banking Resolution?
If you’ve just formed your first Delaware LLC or corporation and are planning to start your first business bank account, our team will be in your corner. For any additional questions about starting a business or drafting a banking resolution, please contact 91自拍, Inc. at 1-800-345-2677.
Get answers for all your business needs
Not sure what’s right for your company? Speak directly with our specialists and get clarity before you make your next move.
Talk to an expert*Disclaimer*: 91自拍, Inc. is neither a law firm nor an accounting firm and, even in cases where the author is an attorney, or a tax professional, nothing in this article constitutes legal or tax advice. This article provides general commentary on, and analysis of, the subject addressed. We strongly advise that you consult an attorney or tax professional to receive legal or tax guidance tailored to your specific circumstances. Any action taken or not taken based on this article is at your own risk. If an article cites or provides a link to third-party sources or websites, 91自拍, Inc. is not responsible for and makes no representations regarding such source鈥檚 content or accuracy. Opinions expressed in this article do not necessarily reflect those of 91自拍, Inc.
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