How to Sign LLC Checks Properly (Proven Expert Techniques)
If you're the owner of a limited liability company, then you know how important it is to sign checks correctly. Checks that are signed improperly can be returned to the payee, which can cause payment delays.
As an experienced business consultant and legal advisor with over a decade of practice, I addressed clients’ concerns regarding the signing of LLC checks.
I’ll provide you with a comprehensive guide on how to sign LLC checks properly and why they need to be signed correctly.
Quick Summary
- To sign LLC checks properly, the issuer must be authorized by the company and the individual’s full name must be followed by ‘member’ or ‘manager.’
- The check should include the limited liability company name, payee’s name, date, amount, and proper signature of the issuer.
- A significant number of banking disputes involving LLCs can be traced back to improperly signed checks, highlighting the importance of adhering to correct signing protocols.
- I always highlight that the practice of clearly and correctly signing LLC checks is not only a legal necessity but also a fundamental aspect of maintaining the professional integrity of the business.
Properly Signing an LLC Check
In my years of navigating the complexities of business operations and being part of Venture Smarter team, I've learned firsthand the critical importance of properly signing an LLC check.
The validity and legality of the check are usually determined by the issuer’s signature—LLC members or managers.
There are a few different ways to sign limited liability company checks.
Member's Name
This is the most common way to sign LLC checks. Here's how it's done:
- "Member's Name, LLC"
To illustrate, John G. Smith, LLC
As Venture Smarter, we recommend this method as it is straightforward. It indicates that the LLC member is signing on behalf of the limited liability company.
Title Block
Another way to sign your LLC checks is to use what is known as a title block. This involves signing the check using the member's full name and title. For example, John G. Smith, Managing Member.
From my experience at Venture Smarter, this method is a little more formal, but it can help prevent fraud or theft.
It also clarifies that the LLC member is authorized to sign checks on behalf of the limited liability company.
No matter which method you choose, be sure to always sign your LLC checks using your full name and title. This will help to ensure that the limited liability protection afforded by LLC status is not lost.
Use a Signature Block
A limited liability company is a business structure that can help protect your personal property if your business is sued. One way to further protect yourself is to use a correct block when signing your LLC checks and any other legal documents.
A signature block is your name, signer's title, and contact information written out below your signature on a check [1].
According to my experience, by including this information, you are making it clear that you are signing the check as authorized representatives of the LLC and not personally.
This can help protect you from personal liability if the LLC is sued.
Who Can Sign Checks for an LLC?
LLC owners and managers can sign checks for an LLC. To verify the individual authorized to sign on behalf of the company, consult your LLC operating agreement or seek legal services.
As Venture Smarter, we advise that the check should always include the name of the LLC and the person signing it.
This will ensure that there is no confusion about who is authorized to sign on the LLC's behalf. It also helps to prevent theft or fraud.
If you are the only LLC member, then you will be the only one who can sign LLC checks. If you have an LLC manager, they will also be able to sign on behalf of an LLC.
What Should Be On LLC Checks?
The following should be on LLC checks [2]:
- The company's name
- Payee’s name
- The amount
- Date
- The phrase "Member Check"
- The proper signature of at least one member of the LLC
If any of this information is missing, the business check may not be valid.
The name of the company should be included prominently on the check so that there is no confusion about whom the check is from.
The phrase "Member Check" confirms that this is a check issued by the LLC and not by an individual LLC member.
According to my findings, when you sign documents on behalf of the limited liability company, you must maintain your limited liability protection and assets.
This means that you need to be very careful about what is included in the checks; otherwise, you risk jeopardizing your personal property.
The Importance of Signing LLC Checks Properly
Recent reports by FinCEN highlight a surge in check fraud cases, with incidents increasing from 250,000 in 2021 to 460,000 in the year 2022 [3].
This alarming trend underscores the critical importance of correctly signing and handling checks to prevent fraud, especially as stolen checks are frequently sourced from the U.S. mail.
By signing LLC checks properly, members ensure that the personal liability protection afforded by LLC status is not lost.
It is essential to sign documents in a manner that distinctly indicates your role within the company. You can seek legal advice if you want to ensure its validity.
By specifying your title when signing, you demonstrate to the other party that you are authorized to endorse business checks on behalf of the company and that the transaction is not personal.
Legal Implications of Incorrectly Signing LLC Checks
Based on our experience, as Venture Smarter, these are the biggest implications of incorrectly signing LLC checks.
Liability and Unauthorized Transactions
If a check is not properly endorsed, it may be considered invalid or fraudulent by financial institutions. This can lead to liability issues for the LLC, especially if the check was used for unauthorized purposes by a member or an employee.
In such cases, the LLC might be held responsible for any financial losses incurred.
Fraud and Legal Disputes
Improperly endorsed checks increase the risk of fraud.
If a check is signed by someone without the authority to do so, or if the endorsement does not comply with the LLC's operating agreement, it can lead to legal disputes between the LLC members, as well as with third parties.
Such disputes not only drain financial resources but also damage the LLC's reputation.
"Any informed borrower is simply less vulnerable to fraud and abuse."
- Alan Greenspan, former Chair of the Federal Reserve of the United States
Compliance with Banking Regulations
Banks have strict regulations regarding the endorsement of checks by businesses, including LLCs. Failing to comply with these regulations can result in the refusal of check deposits, delayed transactions, and even the freezing of the LLC's bank accounts.
It's essential for LLC members to be familiar with their bank's requirements for check endorsement to avoid these issues.
Related Article: How to Start an LLC Bank Account
FAQs
Can My Registered Agent Sign LLC Checks?
Your registered agent can sign LLC checks if your operating agreement stipulates such a rule.
What Is the Proper Signature for an LLC Owner?
The proper signature for an LLC owner should include their full name and role as proprietor, followed by the initials of the LLC. This is to demonstrate that the nature of the transaction is business and not personal.
How Do You Give Someone Signing Authority?
You can give someone signing authority by issuing a power of attorney, which is a legal document that authorizes them to sign on your behalf.
You can also give them what's called a limited power of attorney. This is similar to a regular power of attorney, but it limits the specific actions that the person is authorized to take.
Can I Deposit My LLC Check Into My Personal Account?
You can deposit your LLC check into your personal account, but it shouldn't be used to pay LLC debts and vice versa.
It's recommended to keep your business and personal bank accounts separate, so consider opening a business checking account.
How Do I Endorse Checks Made Out to My LLC?
You can endorse a check made out to your LLC by signing the check using your legal name as it appears on the account, followed by "member" or "manager."
If you're signing a business check on behalf of your LLC, you'll need to write "By (Your Name), Manager" or "By: (Your Name), Member."
Reference:
- https://nationalparalegal.edu/uploads/Signature%20Blocks.pdf
- https://www.sofi.com/learn/content/business-checks-vs-personal-checks/
- https://frankonfraud.com/fraud-trends/american-bankers-check-fraud-cases-increased-84-in-2022/
