Who has the authority to sign LLC contracts

Signing contracts on behalf of a limited liability company (LLC) is an important responsibility that requires careful consideration. The authorized signer must have the authority to act on behalf of the LLC and bind it to the terms of the contract. In this article, we will explore who has the authority to sign LLC contracts, the role of an authorized member in signing contracts, and the importance of following the guidelines set forth in the LLC’s operating agreement or state laws.

What is an LLC Authorized Signer?

An LLC authorized signer is an individual who has been granted the authority to sign contracts and other legal documents on behalf of the LLC. This person is typically designated in the LLC’s operating agreement, which is a legal document that outlines the management and ownership structure of the LLC.

The operating agreement is a crucial document for LLCs as it sets out the rules and regulations that govern the company’s operations. It defines the roles and responsibilities of the members, managers, and authorized signers. It also specifies the level of authority granted to each individual within the company.

If the LLC does not have an operating agreement in place, the state’s LLC laws will dictate who has the authority to sign contracts on behalf of the company. It is important to consult with an attorney to understand the specific rules and regulations in your state.

Authority to Sign on Behalf of the LLC

The authority to sign contracts on behalf of the LLC can be granted to different individuals depending on the structure of the company. Let’s explore the different scenarios:

Single-Member LLC Authorized Signer

In a single-member LLC, where there is only one owner, the owner has the authority to sign contracts on behalf of the company. Since the owner is the sole member of the LLC, they have complete control over the operations and decision-making of the company.

It is important to note that even though the owner of a single-member LLC has the authority to sign contracts, it is still advisable to clearly indicate their capacity as the authorized signer. This helps avoid any confusion or potential disputes in the future.

Multi-Member LLC Authorized Signer

In a multi-member LLC, where there are multiple owners, the authority to sign contracts is typically granted to one or more members or managers of the company. The operating agreement will specify who has the authority to sign contracts on behalf of the LLC and bind it to the terms of the agreement.

If the operating agreement does not specifically designate an authorized signer, the default rule in many states is that any member or manager can sign contracts on behalf of the LLC. However, it is important to note that the consent of all members may be required for certain types of transactions or for contracts involving a substantial amount of the company’s assets.

Authority to Sign for Ordinary Course of Business

For day-to-day operations and transactions in the ordinary course of business, LLCs often grant one or more members or managers the authority to sign contracts on behalf of the company. This allows for efficient business operations and avoids unnecessary delays in executing routine agreements.

However, it is important to carefully define what constitutes the “ordinary course of business” in the operating agreement to avoid any ambiguity or potential abuse of authority. The operating agreement should clearly outline the types of transactions that fall within the scope of the authorized signer’s authority.

Authority for Significant LLC Transactions

For transactions involving significant LLC assets, such as the sale or purchase of real estate, major equipment, or a substantial investment, it is advisable to obtain the approval of all members. These types of transactions can have a significant impact on the LLC’s financial status and require the collective decision-making of all stakeholders.

It is important to note that certain states, like North Carolina, have specific laws that govern the authority to sign contracts for LLCs. For example, Section 57D-3-20 of North Carolina’s Limited Liability Company Act provides guidelines on authority, including the requirement for unanimous member approval for certain transactions involving the LLC’s assets. It is essential to consult the LLC’s operating agreement and state laws to determine the level of authorization required for significant transactions.

Having a clear understanding of who has the authority to sign LLC contracts is crucial to ensure that the company’s legal obligations are met and that the contracts are legally binding. Whether it is a single-member LLC or a multi-member LLC, the authorized signers should be clearly identified in the operating agreement or determined by state laws. It is important to consult with legal professionals to ensure compliance with the LLC’s governing documents and applicable laws to avoid any potential legal disputes in the future.

By following the guidelines set forth in the operating agreement or state laws, LLCs can ensure that their contracts are valid and enforceable, protecting the interests of the company and its members.

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