A limited liability company (LLC) is treated as a person for legal purposes, allowing it to engage in such activities as bringing and defending claims, acquiring property, loaning money, entering contracts, and making donations.
In this article, you will know why it's critical to sign documents correctly to protect your personal assets, as well as who is authorized to sign on behalf of your LLC.
How to Sign For Your LLC?
All members of a member-managed LLC should sign documents on behalf of the business.
Those who aren't authorized to sign for an LLC may simply use an authorized representative function at the bottom of the signature block.
The contract language of a company's operating agreement must clearly state the specific purpose to protect members and managers from putting their personal liability insurance in jeopardy by requiring that every document be signed in the LLC's name.
A proper signature on behalf of the LLC is one where it is evident that the signer is signing for the LLC, not for themselves.
There isn't a precise formula for a good signature, but creating a solid signature block can help.
Identifying the Name of the LLC
The first part of a signature block should identify that you are signing on behalf of the LLC by including the name in which the company is registered.
Include a Clause Specifying Under which Authority you're Signing
This is done to protect the company against future claims that it did not authorize the person signing to wield its power.
It is important to note that some states require the LLC's registered agent to be available for service of process, which means they have to be available for receipt of the LLC's legal documents.
Your state may also require your operating agreement to include a provision by which you appoint the registered agent. Failure to follow this requirement could result in penalties or fines that can cost your LLC money and time.
Including Your Power of Attorney
The final part of a proper signature block is to include your power of attorney. A power of attorney authorizes the person signing to act on behalf of another company or person (in this case, the LLC).
Owners and managers should always use their powers of attorney when signing any document for an LLC to avoid becoming personally liable.
Who Can Sign Documents on Behalf of an LLC?
State laws determine who is authorized to sign legal documents on behalf of an LLC. However, it's best practice to have an operating agreement signed by all authorized signers.
By default, all members (owners) of the LLC have the power to sign contracts on behalf of the business as "authorized representatives."
However, you may take proactive measures to expand or restrict the list of authorized representatives. The method you use depends on the sort of LLC you've chosen.
There are two main types of LLCs:
- Member-managed
- Manager-managed
The "member-managed" LLC is the most popular corporate structure for small businesses. The members of an LLC organized this way are immediately responsible for the organization's day-to-day operations, and they must be able to sign papers on a regular basis.
This makes perfect sense for smaller organizations where each member has significant decision-making responsibilities and needs.
A "manager-managed" LLC is another choice. This might be the case for businesses with at least one passive investor who doesn't manage the day-to-day operations.
It may also be a good fit if the LLC is too big to divide governance responsibilities among all members and you wish to restrict the number of decisions that need signatures to a small board of managers.
You need to remember that any legal document will be invalid if it is signed by someone who isn't authorized to act on behalf of the LLC, such as a low-level employee.
FAQs
Can a Registered Agent Sign on Behalf of an LLC?
Yes. A representative can sign anything on behalf of the LLC as long as they have a power of attorney.
How Do I Sign as a Representative of an LLC instead of as an Individual?
When acting as a representative of an LLC, you should sign your name the way you normally would. However, in order for your signature to be effective on behalf of the LLC, it must also include the following:
- Your title as a representative.
- A statement that your "title is authorized by limited liability company agreement." This expresses that you are signing on behalf of the LLC.
- A statement that your title is "authorized by limited liability company agreement." This expresses that you are authorized to sign in the capacity of your title.
What's The Difference Between Signing as an Individual and Signing as a Representative?
Signing as an individual means that you are signing your own personal name, but signing as a representative means that you are entitled to sign for the LLC.
Authorization To Sign On Behalf Of an LLC: Conclusion
In conclusion, a good signature on behalf of a company is one where it is evident that the signer is signing for the LLC, not for themselves.
There isn't a precise formula for a good signature, but creating a solid signature block can help.
Signing for an LLC can protect members from putting their personal liability insurance at risk by requiring that every document is signed in the LLC's name.
