Is there a right way to sign legal documents for a business? Does how you sign your name to a business document matter? The answer to both questions is, “Yes.” When you, as owner or employee of a business, are asked to sign legal documents for the business, you must pay as much attention to how you sign your name as to what it is you are signing. If you don’t, you should not be surprised when a lawsuit follows. Consider these real-life examples.
Example one: Your mid-level manager, Barbara, signs three agreements with a vendor for about $750,000 over two years. She does not sign the name of your company or her title, only her name. But she places your red “accepted” stamp on the agreement to signify the business has approved the vendor. Barbara’s supervisors then decide your business never wanted to use the vendor. Your business tries to disavow her signature on the agreement. The vendor sues your business.
Example two: You are a business broker whom Robert and Ted hire to help sell the business they founded. On the brokerage agreement, Robert signs as president of the company but not in his personal capacity. Ted signs as a shareholder and in his personal capacity. You facilitate the sale of their business for $50 million. They refuse to pay you. When you sue them, they raise the defense that their signatures were meant to bind only the company they were selling but not themselves.
To determine signature authority in such cases, courts look to two factors: the form of the promise being made in the agreement, and the form of the signature. If you sign the agreement in a confusing way but it is clear you intended to make a valid promise in signing the agreement, the courts probably will hold you to what you signed. But as between the form of the promise and the form of the signature, courts tend to place more weight on the form of the signature.
Hence the question: what is the correct way to sign a legal document for a business? Above your name should be placed the name of the business – for example, “Burleigh Enterprises, Inc.” Below that should be placed a line for your signature. Below the signature line should be printed your name as you will sign it, plus your title or the capacity in which you will sign – for example, “By, David W. Burleigh, President.” If instead the business were named Burleigh Enterprises, LLC, you would sign, “By, David W. Burleigh, Member” (or “Manager,” if your LLC is manager-managed).
If you take care in how you sign legal documents, you will avoid many a legal problem. If you are a manager and bear in mind these issues, you will impress those to whom you report. And if you are an owner, when you pay attention to these issues you will be seen as knowledgeable at closings and key meetings. Your handwriting may be impeccable, but when it comes to signing legal documents, nice handwriting does not suffice.
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