It has been the practice of our commercial lenders to provide the borrower/guarantor a ROR Notice whenever a lien on a principal dwelling is taken as collateral securing the credit, regardless of the borrower (sole prop., partnership, corp., LLC). Do we need to have the borrower execute a formal agreement clearly indicating that the loan is for a business purpose, or is the formal agreement not necessary for ROR purposes?

We don't. The note should indicate who the loan is to. The application should also clearly indicate the purpose of the loan.