Posted by Bill K. (AZ) on March 14, 1999 at 14:18:45:
Matt,
Don’t let those minor requests interfere with your deal. If you have set up your corporation properly, and maintained the necessary records, it should take you all of 3 seconds to produce that information. The business of the corporation should be spelled out in the Articles of Incorporation. This should suffice. If not, take a couple of minutes to generate the resolution.
I don’t see the problem here. You are the one asking for a change in the closing. The least you could do is provide the paperwork being requested. I don’t mean to sound harsh, but I really don’t see why this bothers you so much. Worst case: You buy the property in your name and transfer it to the corporation after closing.
Boy, I hope you close on this one. I don’t know if their request is “normal” or not, but I wouldn’t let this keep me from closing the deal.
After the convention, I realized that the way that I write up offers has been wrong. I incorporated as a C-corp to handle my flips. Since I have a closing on Monday, I called my agent up and said that we needed to change the offer contract slightly. Instead of Matt Bowman listed as the buyer, I wanted PA Home Solutions, Inc. as the buyer. Also, I needed to sign as Matthew Bowman, President at the bottom of the contract. He had no problem with this, and we did it yesterday. He just called and told me that now the closing company wants to see my articles of incorporation and the minutes of the meeting where my corporation resolved to buy this property. This doesn’t sound right. Unfortunately, I let the closing happen wherever the listing agent suggested, since I was not quite up to speed on getting a closing company of my own lined up.
What I would like to know is do I really need to produce these papers? I would think that if it is the business of my corporation to buy and sell real estate, it would not take a special resolution from a meeting to buy the property. Am I correct here? Do I postpone the closing and look for a more cooperative closing company? The sellers have already given them the loan payoff info, lien payoff, etc. My agent has already told me that if I delay the closing, the sellers want another $1,000 in hand money. Looks like a lot of demands are being placed on me pretty quick. I had simply planned to come in with cash (a partner’s) and buy the darn thing in my corporate name. I plan to rehab this house and sell it retail later on. I realize now that I lost control when I told them I would close any where, but does all this stuff sound normal? It doesn’t to me.
Re: question on doing a closing with corporate name - Posted by Bill Gatten
Posted by Bill Gatten on March 15, 1999 at 15:30:37:
Matt,
What the bank is asking for is normal. If they make a loan without a Corporate Resolution, they have no way to perfect their security interest (for all they know some VP who is about ready to be canned made the decision without the concurrence of the others). Simply type up a form entitled Corporate Resoltution to Acquire Real estate; name the parameters; and have your corporate officers sign it (you, you wife, brother, attorney, whoever). The Articles of Incorporation is what you paid for when you set the corporation in the first place (assuming you did it legally or properly). What other proof of the existence of your corporation could they ask for?
Include something like the following in your mintues or in a form entitled Resolution:
“At a Meeting of the Board of Directors for the ___ Corporation, on //___ the undersigned officers, constituting a majority interest of the voting powers of the corporation, do hereby agree by their signatures below to acquire the real property known as ___, and legally describes as ___. for the sales price of ___ with approximate monthly payments of ___ for ___ years, and a down payment of ___, etc., etc.”
when doing a business deal. It is good that they ask for this, otherwise anyone could say they’ve incorporated (even if they have not) and create an interesting legal situation that the title company would be responsible for if they allowed the deal to close.
The articles are what was filed with the Secretary of State to create the corporation.
For $20-$25 you can buy what’s called “Corporate Secretary”, which comes in either book format or CDRom/floppy disk. It’s available at Office Depot, Office Max, and Staples. This has almost every possible resolution you could think of. Buying the software version, you install it, pull up the resolution you need, and fill in the blanks. In some ways it’s good to have both versions if you’ve never done a resolution before; that way you can generate one even on the road if necessary (like in another state when all you’ve got is a typewriter and the book at hand). A corporate resolution is nothing more than a permission slip from the board of directors that shows that the board and/or shareholders agreed to allow someone within the corporation to perform whatever it is they are doing.
It is good to have it worded so that those directors have “voted and elected to” do whatever it is, and it should be signed by an officer of the corporation; in practice it is quite often done by the corporate secretary on the officers list of the corporation.
The title company may be concerned that you have in fact incorporated if this is a brand new corporation. This is nothing out of the ordinary. All title companies want to make sure that the corporation is legally in existence.
As for the corporate resolutions this should be no big deal for you to put together this information also. This can be a simple one page document.
Remember when doing transactions through a corporation, you need to do everything by the book. Take some time and read through the articles of incorporation and the by-laws. Those are the rules that your corporation must live by. You should do your best to follow them to the letter. If all you do is put the original articles of incorporation and by-laws in a folder and never open it again, creditors and tenants and lawsuits might very well be able to “pierce the corporate veil” and come after the owners personally. I think Bill Bronchick has an article on “Bulletproof Corporations.” You may want to read it.