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Who can Sign Contracts for My San Diego Business?
Most business contracts are made in writing and, occasionally, the question arises: Who can sign contracts for my business? In short, the answer is owners and anyone who the owners authorize to sign contracts on behalf of the business. In practice, the answer is a bit more complex.
The Business Form Makes a Difference
If you are running your business as a sole proprietorship, the only person who can sign contracts is you, the owner. You can, of course, delegate that authority to some trusted employee. You can limit that authority to only certain kinds of contracts — purchase orders for raw materials, for example, but not real property sale/purchase agreements.
If you are running your business with partners as a California general partnership, then all the owners — all the partners — can sign contracts and bind the partnership. Each partner can do this even in the absence of notice or approval of the other partners. That is the nature of partnership and can be considered a “down side” of running your business as a partnership.
Two Signatures Needed for Corporate Entities
If you are running your business via a corporate form, such as a corporation or an LLC, then who can sign contract is a little more complicated. With corporations, it is common for the bylaws to authorize certain corporate officers to sign contracts on behalf of the company. Likewise, a well-drafted LLC operating agreement will authorize the managing member(s) to sign contracts and bind the LLC. In general, with corporations and LLCs, two signatures are needed.
However, and here is where it gets really complicated, in truth, how many signatures and whose signature is dependent on whether the corporation/LLC is SUING to enforce a contract or is BEING SUED.
If the corporation/LLC is suing, then almost any signature and even a single signature is sufficient even if the signature is the front-of-the-store-cashier. This is true because of the doctrine of ratification. Even though the front-of-the-store-cashier is not authorized to sign a contract, if the company likes the contract, then the Board of Directors or the Managing Member(s) can simply vote to “accept and ratify” the contract. This also flows from the fact that, in contract law, the signature that matters is the signature of the party being sued. See Cal. Civ. Code § 3388.
If, on the other hand, if the corporation/LLC is BEING sued, then it matters who signed and under what title/office. If a corporation is being sued, two signatures are needed: a signature from among the Chairman of the Board, the President, Vice-President and the like and a signature from among the Treasurer, Secretary, assistant secretary and the like. See Cal. Corp. Code § 313.
If an LLC is being sued, then at least two managers must sign or one “… in the case of a limited liability company whose articles of organization state that it is managed by only one manager …” Cal. Corp. Code § 17703.01(d).
Legal Lessons for Contract Signing
As can be seen, something seemingly as simple as “who can sign contracts” for my business is a complicated legal question. This is yet another reason that every business needs an experienced and talented San Diego County business lawyer. This is also another reason to have your corporate bylaws and LLC operating agreements custom-drafted.
Contact San Diego Corporate Law
For further information, please contact Michael Leonard, Esq. of San Diego Corporate Law. Mr. Leonard has the experience to draft your Corporate bylaws, LLC Operating Agreement and to ensure proper contract formation and execution and can assist with any other business-related legal matter. Contact Mr. Leonard by email or by calling (858) 483-9200. San Diego Corporate Law provides legal services in San Diego and surrounding communities like La Jolla, La Mesa, El Cajon, Chula Vista, Coronado and National City.
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