What is a corporate resolution to borrow, and who has to sign it?

What the document does

A corporate resolution — a members' or managers' resolution in an LLC, a board resolution in a corporation — records a decision:

• That the entity is authorised to enter this transaction
• The maximum amount, and sometimes the specific facility
• Who may execute the documents and grant security on the entity's behalf
• That the decision was made in accordance with the entity's governing documents

Lenders frequently pair it with a certificate of incumbency identifying the officers and their signatures, and with a copy of the operating agreement or bylaws so they can check the resolution against the rules it claims to follow.

Why lenders care

Without it, an agreement signed by one person could later be challenged by a co-owner as unauthorised. That challenge is precisely the risk the resolution removes, so lenders treat it as a condition rather than a formality.

Where files actually stall

How you sign matters as much as who signs

A resolution establishes that the entity authorised the transaction. The signature block is where that authority is actually exercised, and it is easy to get wrong in a way that matters.

The form to use names the entity first, then you, then your capacity, on four lines:

Signing your own name alone, on a line with no entity above it and no title beneath it, is how people end up arguing about whether they signed personally. It is not usually fatal — courts look at the whole document — but it is an argument you never need to have, and it takes ten seconds to avoid.

Two related checks. Make sure the entity name matches the certificate exactly, including "LLC" versus "L.L.C." and any comma. And read the guarantee separately: a guarantee is meant to be signed in your personal capacity, with no entity and no title, and that one is not a mistake — it is the point of the document.

What a lender checks the resolution against

Expect all of these to be read together, and expect a mismatch between any two of them to stop the file.

• The certificate of good standing from your state, dated recently.
• The articles of organisation or incorporation, plus every amendment.
• The operating agreement or bylaws, including amendments and any member consents.
• A certificate of incumbency naming officers or managers and their signatures.
• The ownership schedule, which also has to line up with the beneficial ownership certification.

When a partner will not sign

It happens, and there are only four routes. Persuade them. Find the threshold in the operating agreement below which you can act alone, and size the request under it. Amend the governing document, which requires their consent anyway and so rarely helps. Or buy them out, which is a different transaction with its own financing.

What does not work is signing anyway. A facility drawn on an unauthorised resolution is a problem for you, for the lender, and eventually for a court, and the misrepresentation is personal.

The related requirement people confuse it with

Beneficial ownership. Under federal customer due diligence rules, financial institutions must identify the individuals who own or control an entity. That is an identity requirement — names, dates of birth, identification numbers for people at or above the ownership threshold and one control person — and it is separate from the authority question the resolution answers. You will often be asked for both, and completing one does not satisfy the other.

What to do before you apply

Read your own operating agreement or bylaws and find the clause on borrowing and on granting security. Establish who has to sign and what the threshold is. If a signature will be needed from someone hard to reach, start that conversation at the beginning rather than in the last week of a closing.

If the governing documents are out of date, get them corrected before a lender reads them. A resolution that contradicts the document it relies on creates exactly the doubt the lender was trying to eliminate.

One thing to check on the way through

Read what you are authorising. A resolution can be drafted broadly — authorising borrowing generally, granting security over all assets, and permitting the named signatory to bind the company in future transactions. If you intended to authorise one facility, ask for it to say one facility.