A very common question we get asked at our law firm of McGrath and Spielberger is “What do I need to do to add an owner to my company?” The answer to that exact question is similar to the related question of “How do we transfer the ownership interests of a Member who is leaving the LLC?” Of course, you can also have a situation in which a current Member is only transferring or selling some of that Member’s interests in the company.
See Part 1 of this series for a general overview of sale / purchase / transfer of company membership interests and the legal process and Part 2 for more information on the Purchase and Sale Agreement / Membership Interest Transfer Agreement. This Part 3 focuses on the “Resolution” which should be a part of the membership interest (ownership) transfer process.
Key decisions by and for a limited liability company should be – and sometimes must be – voted upon, with the vote outcome and resulting decision permanently recorded in writing. When such votes and decisions result in a fundamentally important action being taken, it is proper to have an “LLC Resolution” document created and executed. (Technically, a decision not to take action can also be memorialized in an LLC Resolution.)
An LLC Resolution document can be made up of the elements in the bullet point list below, which is a basic list and example; of course, each situation is different. A transfer of membership / ownership interests in an LLC should result in an LLC Resolution as part of that legal process. Some basic elements of LLC Resolutions:
- header / title
- the formal name of the LLC
- names of the parties to the Resolution
- background / context
- a description of the circumstances which led to the decision
- what, exactly, have the parties to the Resolution now resolved to do?
- date of the Resolution
- names and signature lines for the parties to the Resolution
An LLC Resolution is typically a private document vs. something which gets “filed” with anyone. This doesn’t mean it is forever confidential, it’s just internal. The contents of an LLC Resolution could be agreed to be confidential by the parties, although that also does not guarantee it will never be seen by outside persons or entities.
The law does not require an LLC Resolution to be notarized or witnessed by any third parties. In concept, there could be a requirement within a certain limited liability company which does require it – but that would be uncommon.
The LLC Resolution is typically part of the formal proof that a company and its members followed the rules to decide whether to act on a major issue and then in fact do so. It also serves to be a clear-cut, summary type statement of what was agreed upon and is being done. Anyone who is a signor to that Resolution should have a tough time later claiming to be unaware of what was decided or to deny that they agreed to the decision.
Most experienced business law attorneys can handle an LLC Resolution without too much trouble – and that would typically be part of a larger set of work the attorney is handling for the company. However, attorneys need to pay attention and have their brains and skill sets engaged even when performing straightforward work. Paying attention gets the best results for clients, which is what we do here at McGrath & Spielberger.
