A Limited Liability Company (LLC) is formed under state law. An LLC may be managed by the owners, known as Members, or may be managed one or more Managers, who do not have to be Members. Signing documents for an LLC must be done correctly.
In the LLC Articles of Organization, the LLC declares whether management will be done by the Members or by a Manager. An LLC may have a single member.
A Sole Proprietorship has a single owner, also known as a proprietor. The owner of a sole proprietorship is not known as a Member.
A member-managed LLC may have some members with management authority, known as Managing Members, and other members who are passive investors without management authority, Non-managing Members. Non-managing members do not have authority for signing documents for the LLC.
An LLC may elect directors and officers. The Board of Directors sets and monitors the direction or goals for the company, and may elect a Chairman of the Board. Elected or appointed Officers, such as a CEO, President, Vice-President, Treasurer, and Secretary, have executive power to take action to accomplish the goals set by the Board of Directors.
LLC Operating Agreement
The specific duties of the directors, managers and executive officers are defined in the LLC Operating Agreement. If the LLC does not have a written Operating Agreement, then the state laws for operating an LLC apply by default.
Anyone that owns a Membership Interest in an LLC is an owner. But an Owner is not a title to use when signing documents for an LLC. An owner may have no authority for signing documents as an agent of the LLC since an owner might not be a director, manager or officer.
An owner might not even be a Member of the LLC. The Operating Agreement defines the requirements to be admitted as a Member. For example, if an owner of a Membership Interest is sued personally, a creditor may be awarded the ownership of the Membership Interest formerly held by the Member.
The creditor would become a new owner of part of the LLC, but would not have any authority to manage the LLC or the right to vote on LLC matters, unless admitted as a Member by a vote of the remaining Members, That is a risk of a single member LLC. A creditor might become an owner and then a Member if there is no opposition by other Members.
If the Articles of Organization declare that the LLC will be managed by Managers, then signing documents such as contracts should be done correctly by a Manager or an authorized officer, not a signature followed by the word Owner. For a sole proprietorship, Owner would be acceptable.
LLC Signature Example:
Acme Services, LLC
Julius Caesar, Title (Manager, Managing Member, CEO, President, etc.) (not Owner)
Certificate of Incumbency
An LLC, Corporation, Partnership or Association can sign a notarized Certificate of Incumbency.
The Certificate of Incumbency is a sworn statement by the Manager, President or Secretary, listing the current authorized Managers, Directors and Officers of the company. These are the current people with authority for signing documents as an agent for the LLC. The names of the Members of the LLC can remain private and confidential.
By signing documents as Owner, there is a risk that the signer may be ruled to be acting personally, not as an agent on behalf of the LLC, or acting without authority if the LLC is organized to be managed by Managers or Officers, and the signer might be taking on personal liability by providing a Personal Guarantee, in addition to any liability of the LLC.
Don’t risk your personal assets or provide personal guarantees by signing documents incorrectly. Get advice from a knowledgeable business attorney to follow the LLC laws for your state and the proper way for signing documents, contracts, leases, deeds, motor vehicle titles, checkbooks, etc. Sign documents correctly to help maintain the limited liability protection of the LLC.
[Disclaimer: This article is not to be used or considered as legal advice.]
[Last-Modified Date 2017-03-16] add review schema, new image