Most business owners choose LLC formation because of its advantages, which include limited liability. Through this, members of the LLC can protect their assets. To ensure that your assets are well-protected, you should make sure there is a clear distinction between these assets and those that the business owns. You should also be careful when dealing with various documents.
Many people think that signing legal documents is enough. However, what they do not realize is that it is also necessary to sign these documents correctly. For members of an LLC, it should be clear that they are signing documents or agreements for the company.
Before entering an agreement, you should ensure that the contract specifies that it will be between the LLC and the other party and that you, as a member, are not involved personally.
Importance Of Titles In LLC Formation
LLC titles have the same importance as titles that corporations and partnerships use when signing legal contracts and documents. As a member, you should not forget to include the appropriate title within the company when you sign an agreement. It is a way to establish that you are only acting on behalf of the company.
Members often represent LLCs. However, there are some instances when an LLC hires an outsider to run the business. These people are called managers. Only a member or a manager can sign on behalf of an LLC.
For example, you are the manager of the LLC. You should use that title when signing the documents. Your signature should provide two things.
- It should ensure the other party that the LLC authorizes you to sign the contract.
- It should inform the other party that you are signing the document on behalf of your LLC.
Problems That May Arise During An LLC Formation
If you fail to include your title, you could make your assets vulnerable to risks and attacks in case the contract encounters issues. Having only your name and signature indicates that you have signed as an individual. If this thing happens, the other party may be able to file a lawsuit against you as a person. If the court rules that you are personally liable for the losses, your assets could be at risk.
First, you should make sure that the contract is under the name of the LLC. Next, you should check if the signature includes your name, your title in the LLC, and the name of the company. Read the contract carefully. Make sure it is clear that the contract is between the LLC and the other party. It should only involve the parties that have signatures.
Sometimes, you will need to sign as a person and for the company at the same time. This situation often happens when the other agency or organization wishes the new company to offer both personal and LLC guarantees.
For example, after the LLC formation, you have decided to borrow from a commercial lender. In this case, you might have to offer personal and company guarantees since you cannot show an operating history yet.
Sometimes, one cannot help but make changes to a document before the signing. In these cases, it is best to incorporate the changes using a computer. This way, you can easily print out the new version of the agreement. But if it is not possible to include the changes before printing, you can write the changes or type them directly onto the current printed copies. If you do this, make sure that all parties involved will sign their initials beside the additional changes that you made. These initials will serve as proof that they are aware of the changes and that they agree to them.
All parties that are involved in the agreement should have a signed copy of the document. To ensure this, you should print out copies as many as the people who will sign. Doing this will guarantee that everyone gets a copy. Make sure that each copy is complete. Include all annexes and attachments.
Other companies make use of fax machines or electronic signatures. If this is the agreed communication method, one party should sign a copy and send it to the other party. In return, the other party will sign it and send the signed copy back. Fax or electronic copies may be enough for both parties. However, you can exchange original signed copies by mail to be sure.