John Hancock knew how to sign his name- so large that King George could read it without his glasses. But could he sign for a corporation as effectively?
Most small business folks who do business today as a corporation are clueless when it comes to signing contracts on behalf of their corporation.
When they sign their name, without more, on the line that says “Owner”, they may have made themselves personally liable for the obligations in the contract.
Signing just your name likely defeats the very reason that you incorporated your business. You’ve just put yourself personally on the hook.
Why your business is a corporation
In the law, a corporation is a legal person, separate from the individuals or other entities who own its stock. Despite how invested, financially and emotionally, you are in your business, you and the business are really two separate entities.
The invention of the corporation made it possible for business people to limit their risk in an incorporated business to the amount they paid for their stock. The creditors of the corporation couldn’t collect their claims from the stock holder.
That ability to limit your risk, to keep your business creditors away from your personal assets, probably figured large in your decision to incorporate.
How a corporation gets things done
Because a corporation is a “person” without any fleshy substance, it needs people to act for it.
Those people are its employees, managers, or its officers. They can wield a pen and sign for the corporation.
A signature on a contract serves as proof that the signatories take on the benefits and burdens described in the written documents. Physically, a real, live person has to sign.
But how do you sign for the corporation?
Sign for the corporation
Let’s assume that the document in question is an order for the design of a new website for your business and a year’s worth of maintenance.
You are the stockholder, president, and the manager of My Business, Inc. (For most of us small business folks, we are also the secretary, janitor, bookkeeper for the business as well.)
If this deal goes south, you don’t want the service provider suing you, liening your house, and garnishing your wages. This is a corporate deal.
So, here’s how you sign the contract on behalf of your corporation:
MY BUSINESS, INC.
___________________
By Your Name, President
You sign your name as you always do, but in your capacity as an agent of the corporation.
Contracts don’t have to be signed by the president. They can be signed by any party the corporation has authorized to act for it. You could be, just as legally, the vice president, the CFO, or the general manager.
By adding your role in the corporation, you have signaled that the party to the agreement is the corporation, not you personally. The entity making the promise to pay is the corporation, My Business, Inc.
Your signature as a representative of the corporation doesn’t put you personally on the hook for payment.
Good work, Mr. President!
More
Write a contract without a lawyer
Essential habits for entrepreneurs
Myth of the corporate credit card
Fish hook image: © johnsroad7
