If you are business savvy and have created an LLC, the Top 2 things to remember when signing contracts are:
- You MUST have authority to sign the contract on behalf of the company (LLC)
- Do NOT sign the contract in your name personally (or you risk the very reason – limited liability – for forming the LLC in the first place)
First, keep in mind that the other party must be comfortable that you have the authority of the limited liability company (LLC) to sign contracts. As a member or manager, you legally have that authority. Second, the other party must be aware that you are not signing the document personally, but on behalf of the LLC.
- Did you know that there is a correct way (and an incorrect way) to sign a contract as an LLC? Well, there is.
For example, if you sign a contract simply as “Jenny Smith,” you have signed personally (not as a member or owner of the LLC). Should a contract default occur, you can be sued personally – – and if you have assets — bank accounts, a house, car – these assets will be exposed and at risk because the court can now determine that you, not the LLC, personally have liability for the loss.
- With LLCs Titles Are Important – The Proper Signature
When signing legal documents and contracts on behalf of the LLC. If your title is “member” or “manager,” it must be used when you sign documents. For example. the proper signature is… “Jenny Smith, Manager, A Beautiful Life, LLC.” Since companies cannot sign for themselves, your signature on the contract would identify you as the person signing on behalf of the LLC. With that signature, you have now included your title and authority to contract on behalf of the company.
- The Potential Problem With Incorrect Signatures
Should you sign an agreement with only your name, you risk exposing all of your personal assets to attack if something goes wrong with the contract. For example, if you sign simply as “Jane Smith,” you have signed personally. Should an issue occur with the contract, you risk eliminating the primary reason — the limited liability — for using the LLC entity structure by signing legal documents incorrectly. You must make it clear that you sign documents for the company, and the contract language should clearly specify that the agreement is between one party and the LLC, not you personally. In short, be sure to establish and make it crystal clear that you’re signing on behalf of the company, not as an individual.
Review your contracts to be sure that they are signed properly.
If you need my help – call or email me at firstname.lastname@example.org today.
I will be happy to review any contracts you are unsure about.
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P.S. – If you are ready to move forward in 2018 and get your business on the right track connect with me to get your legal foundation right. Complete the application for my signature 4-week Business Basics online legal course intensive to learn more. During the 4 weeks of the course, we will dive deep to learn about independent contractor agreements, basic service agreements, operating agreements, LLCs and more.. to secure the foundation of your business. Invest in yourself and invest in your business. Click here to complete the application.
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