Your company’s operation depends on the deals it makes, but who can sign those contracts? The answer depends on how your business is formed and the founding documents your company has in place.
Who can sign on behalf of sole proprietorships and partnerships?
Because the owner or partner in these companies is not necessarily a separate entity from the company itself, sole proprietors and general partners are generally able to sign on behalf of their company. In many cases, only one partner may be needed to sign on behalf of the company. Depending on the company’s founding documents, limited partners may not have the authority to sign on behalf of the company.
It is important for those in partnerships to remember that it may be possible for one partner to commit the business to a contract without the other’s agreement or knowledge. Because of this, it can be particularly important for all those in a partnership to thoroughly discuss a business deal before they consider signing a contract.
Who can sign on behalf of Limited Liability Companies (LLC) and corporations?
Because LLCs and corporations are separate from their founders and stakeholders, their leadership are not automatically able to sign on behalf of a company. Generally, an LLC must designate the employees signing on behalf of the company in the operating agreement. Chief executive officers (CEO) or presidents of corporations are presumed to have signing authority, while the company must specifically grant others the authority either in its operating agreement or in other documentation.
In these cases, someone who signs on behalf of the company without authority—whether signing a major contract or signing something as everyday as a paycheck—then the company is not bound by that signature.
Because your company depends on accurate, enforceable contracts, it can be important to review the agreements in place and seek legal guidance to ensure that the right people have the authority to sign on the business’s behalf.