How to Sign on Behalf of an LLC

By Joe Stone

A limited liability company is a legal entity you can create to operate your business. Every state has its own LLC laws that specify how to create an LLC and establish its management structure. An LLC is a unique type of legal entity because it protects your personal assets from the debts and liabilities of the business, while giving you considerable flexibility regarding how to manage the business, including designating who is authorized to sign on behalf of the LLC.

A limited liability company is a legal entity you can create to operate your business. Every state has its own LLC laws that specify how to create an LLC and establish its management structure. An LLC is a unique type of legal entity because it protects your personal assets from the debts and liabilities of the business, while giving you considerable flexibility regarding how to manage the business, including designating who is authorized to sign on behalf of the LLC.

LLC Members' Management Authority

Each state’s LLC laws define the LLC owners as “members” and specify that each member is authorized to act on behalf of the LLC, unless the members decide otherwise. As a general rule, each member will have authority to run the LLC in proportion to his percentage ownership in the LLC; however, this only applies to a vote among the members on what action the LLC should take. With regard to third parties, a member who has authority to act on behalf of the LLC can sign documents, such as a contract, that will incur liability for the LLC.

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Designated Managers for an LLC

LLC members can choose to designate management authority for the LLC in one or more members, or in a non-member. Most states require this choice to be specified in the LLC initial filing to create the LLC, such as the articles of organization. Additionally, the members who choose to designate a manager will adopt an operating agreement for the LLC that will specify the managers' authority. Any person designated in the operating agreement to manage the LLC, whether he is a member or not, has authority to sign documents on behalf of the LLC.

Authority to Delegate Signing Power

In addition to specifying a manager for the LLC with signing authority, the members or manager of an LLC can designate any person to have signing authority. The designated person is not required to be a member or manager. For the most part, such a delegation of authority will be limited to specific situations. For example, the designated person may have check signing authority, but only up to a specified amount and for regular monthly bills, as opposed to general signing authority.

Authorized Signing Basics

All persons authorized to sign on behalf of the LLC must understand how to properly sign on behalf of the LLC, or risk incurring personal liability. Proper signing requires you to include your name plus wording that indicates you are signing on behalf of the LLC and your relationship to the LLC, such as manager or member. Also, when signing any contract on behalf of the LLC, you should review the contract language carefully to determine that it does not indicate that you will be liable personally. Even if you sign the contract properly as a designated manager of the LLC, the contract language may make you liable if it is not properly worded.

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Who Is Liable in an LLC?

All jurisdictions within the United States allow business owners to create a limited liability company structure. The most common reason for creating an LLC is for owners to obtain the benefit of limited personal liability. However, the formation of an LLC does not provide owners, who are called members, with an unrestrictive license to avoid personal liability for all activity. Limits on liability are only available for activities within the scope of ordinary business practices.

Does an LLC Have to Have Officers?

A limited liability company is a state-regulated business organization that is a hybrid between a corporation and a partnership. Like a corporation, the owners, otherwise known as members, are generally not held personally liable for the business’s liabilities. However, the business is taxed like a partnership; the LLC is not taxed but the business’s profits and losses are included on the members’ returns. An LLC does not have to have officers like a corporation does, but some businesses may find it useful as it helps establish a clear hierarchy and the roles of each member of management.

Rights & Authorities of the Manager of an LLC

Inherent in the limited liability company structure is the right of owners, who are known as members, to participate in the management activities of the business. The jurisdiction in which you create the LLC provides the rights and authorities of an LLC manager if an operating agreement does not exist. In some instances, the rules governing managers diverge depending on whether the manager is an LLC member or a non-member employee.

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