How To Sign On Behalf Of An LLC? (Full Guide)
At Venture Smarter, we understand that a limited liability company (LLC) is a legal entity allowed to engage in various activities, such as bringing and defending claims, acquiring property, loaning money, entering contracts, and making donations.
All of these actions can be accomplished by signing on behalf of your LLC.
With over a decade of practice as a business consultant for limited liability companies, I have addressed clients' needs and concerns with management and personal liability.
After in-depth research and collaboration with our Venture Smarter team of attorneys, I’ll provide a comprehensive guide on how to sign legal documents and avoid liability.
Quick Summary
- To sign on behalf of an LLC, include the name of the company, the signatory position, and the authority to do business in the check.
- Members, managers, or the registered agent can sign on behalf of the company if the operating agreement stipulates.
- According to Norton Rose Fulbright’s 2023 Annual Litigation Trends Survey, nearly half of corporate counsel reported an increase in regulatory and employment disputes in 2022, indicating the importance of proper signing on behalf of an LLC in order to avoid issues.
- In my opinion, meticulously following the correct signing protocol not only safeguards the LLC's legal standing but also reinforces the professional integrity of the business.
How to Sign For Your LLC?
To sign for your LLC, as Venture Smarter, we advise including the company's name, the representative’s title or position, and signature in the signature box.
1. The Name of the LLC
Identify the name of the limited liability company to indicate that you are signing on its behalf as an authorized representative.
2. Representative Title or Position
Include your title or position in the limited liability company to demonstrate that it is a business transaction and not of personal interest.
From my experience, the distinction would allow the representative to protect personal assets.
3. Include a Clause Specifying Under which Authority you're Signing
Including an authority clause is done to protect the company against future claims that it did not authorize the signatory to represent the company.
The authority clause must qualify representation by a managing member or the LLC’s registered agent.
4. Include Your Power of Attorney
Include your power of attorney, which authorizes the person signing to act on behalf of another company or person (in this case, the LLC) [2].
Based on our experience as Venture Smarter, an LLC owner or managing member 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?
All LLC members (owners) can sign documents on behalf of an LLC as "authorized representatives." However, you may take proactive measures to expand or restrict their rights.
An LLC operating agreement that specifies the designation is recommended.
State laws can be used as the default option to determine who is authorized to sign legal documents on behalf of an LLC.
Those not authorized to sign for an LLC may simply use an authorized representative function.
The contract language of a company's operating agreement must clearly state the specific purpose of protecting members and managers from jeopardizing their personal liability insurance by requiring that every document be signed in the LLC's name.
The management structure of an LLC may also determine who can sign documents on behalf of the limited liability company.
Owners of member-managed LLCs are automatically authorized to conduct business and represent the entity.
Consequently, a managing member can take direct charge of daily operations and be responsible for signing legal documents regularly.
In a manager-managed limited liability company, a professional individual or entity is employed to oversee their business and act as the authorized representative on behalf of the LLC.
Legal Implications of Improperly Signing on Behalf of an LLC
According to our findings as Venture Smarter, these are the legal implications of improperly signing on behalf of an LLC:
- Personal Liability Exposure: In legal terms, this might be interpreted as the individual entering into the agreement in their personal capacity, rather than on behalf of the LLC. Consequently, should the agreement go awry, the individual could be personally liable for any resulting debts or legal claims.
- Fraud and Misrepresentation Claims: If a party signs on behalf of the LLC without clear authority or misrepresents their capacity to do so, it could lead to claims of fraud or misrepresentation. Such situations can result in significant legal liabilities, including compensatory and punitive damages.
- Loss of Contracts and Revenue: Contracts signed improperly may be deemed unenforceable, leading to the loss of critical business deals and revenue streams. This can have a cascading effect on the LLC's financial health, affecting its ability to fulfill other obligations and secure future contracts.
- Legal Costs: The legal battles to defend the validity of improperly signed documents or to address claims of personal liability can be costly. Legal fees, court costs, and potential settlements or judgments can strain or deplete the LLC's financial resources.
- Reputational Damage: Legal disputes and the public exposure of improper signing practices can damage the LLC's reputation. This may deter potential clients, partners, and investors, hindering growth and operational success.
"The liability of an Actor for actions taken on behalf of the LLC is neither automatic nor totally precluded. It is essential to understand the nature of the action, the duties owed, and the nature of the damages sustained."
- Atty Danya Shakfeh, Founding Attorney at Motiva Law
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FAQs
Can a Registered Agent Sign Documents of an LLC?
A registered agent can sign documents of the LLC as long as it is indicated in the operating agreement.
How Do I Sign as a Representative of an LLC instead of as an Individual?
To sign as a representative of an LLC instead of as an individual, include your title as the representative in the signature box. Also, include a statement that your "title is authorized by limited liability company agreement" to express that you are signing on behalf of the LLC owner.
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 authorized to sign for the LLC. This will ensure that your personal assets are protected from any legal action.
References:
- https://www.consumerfinance.gov/ask-cfpb/what-is-a-power-of-attorney-poa-en-1149/
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