In this episode of Coffee with Carl, attorney Carl Zoellner explains how to sign documents for your business entities while still maintaining your privacy and liability protection.
Many investors and business owners who are new to entity structures ask: how do I sign? We use business entities for tax purposes, privacy, and to limit liability, so it’s an important question. You don’t want to blow your liability protection and privacy with your signature. It’s understandable there’s confusion out there since the purpose of entity structures is to maintain separation between yourself and your business.
I frequently receive questions from clients about how to sign documents on behalf of their entities. So, let’s discuss this in a general way. If you have a more complex entity structure and have questions about how to sign, you can always call in for a free consult with a professional advisor.
Sign on the Dotted Line
If you’re trying to figure out how to sign your documents, my main tip is to check your paperwork. Go to the end of your operating agreement (for your LLC) or bylaws (for your corporation). There’s a signature block there with how you should sign and in what capacity.
When signing on behalf of my LLC, I’m usually signing in the capacity of “manager.” When signing on behalf of my corporation, I’m usually signing in the capacity of “officer.” When you sign as manager or officer, you’re designating that you have the right to bind the business to decisions without revealing your ownership.
When you start utilizing more advanced business structures, things can feel more complicated. For instance, let’s say you have a rental property that’s owned by a Wyoming holding LLC that’s manager-managed and you’re the manager. You also have a Texas LLC that’s member-managed and the Wyoming LLC is the member. How would you sign for the Texas LLC?
At the level of the Texas LLC, the member is the Wyoming holding LLC. You are the manager of the Wyoming holding LLC, so you know you have the right to sign for the Wyoming LLC as its manager. Then, how do you connect the two?
When you sign for the Texas LLC, you’ll note that you are the manager of the Wyoming LLC, which is by extension the manager of the Texas LLC since the Texas LLC is set up as member-managed with the Wyoming LLC as its member.
Although this may sound cumbersome and confusing, what it mainly boils down to is a lengthy title block. In your day-to-day business activities, you’re not going to be signing a lot of documents, so it’s more about getting this idea squared away at the outset.
Make sure to sign documents in your capacity within that entity and not as an individual because that could bring liability back to you.
Watch as Carl covers how to sign documents for business entities and entity structures.
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