How to Sign on Behalf of a Limited Liability Company

asset protectionWhen a real estate investor thinks of asset protection the LLC is the first entity that typically comes to mind.  As it should because the LLC is the primary defense for investors from lawsuits stemming from harm associated with real estate.  State LLC Acts routinely provide that a member in a LLC is not labile for the debts or obligations of the LLC solely by reason of being a member.   This liability shield is fairly strong unless a member gives it up either intentionally in a contract or by mistake.

An easy way to mistakenly give up your protection is by not properly signing agreements with the appropriate signature block that designates your representative capacity.  When signing a LLC the signature block should contain the LLC’s name and the title of the signing member, or manager.  Mishandle this important step and the courts may not be so forgiving.

In Hazer v. Zabala, 26 A.3d 1166, 2011 Pa. Super. LEXIS 2227 (Pa. Super. Ct. Aug. 11, 2011), Juan Zabala signed his name to a lease, and underneath printed “DBA/ZABALA BROKER, LLC.” The landlord sued Zabala when the rent was not paid, and Zabala defended on the ground that the LLC, not Zabala, was the party to the lease.

The court disagreed.  It found the “DBA” was an abbreviation for “doing business as” and saw Zabala’s signature and an indication that Zabala Broker LLC was just another name for Juan Zabala.  The problem for Mr. Zabala is his signature did not identify his representative capacity in the LLC.  Without such a designation Mr. Zabala obligated himself personally under the lease.  Here are some common errors I have come across:

John Doe on behalf of ABC, LLC  — (John has not indicated his position)
John Doe, ABC LLC  — (John has not indicated his position or representative capacity)
John Doe Manager  — (John has indicated his position but not his representative capacity)
John Doe President  — (LLCs do not typically appoint officers)

When signing on behalf of you LLC you should sign as follow:
John Doe on behalf of ABC, LLC as its Manager (in the case of a member managed LLC you would use Member/Manager) or in the case of a Corporate Manager – John Doe, President of XYZ, Inc, on behalf of ABC, LLC as its Manager.

Another issue in Zabala the court recognized was Zabala Broker LLC was not in existence at the time Mr. Zabala signed the lease.  Thus, by not forming your entity prior to entering into a contract no signature block, no matter how correct, will save you from personal liability.

This should serve as a reminder that it is the details that matter.  The weakest link in your asset protection planning is also the strongest because it can break your protection.

0 comments On How to Sign on Behalf of a Limited Liability Company

  • This is good stuff Clint. I certainly appreciate the advice since I am going to embark on the road of real estate investing in the future.
    Thanks!

  • Excellent information!

    What if you formed an LLC that will do business as a couple different businesses.

    For example Acme Great Co LLC.

    Acme Great Co LLC DBA Copiers R US

    Acme Great Co LLC DBA Used Book Unlimted.

    Would this be accaptable?

    John Somebody on behalf Acme Great Co LLC who is doing business as Copiers R US, authorized Manager of both entities.

    • John,

      Yes this would work. Provided your LLC does not hold a lot of assets then using DBA’s is preferable to creating multiple entities. The problems occur when you have a business that has significant assets then decides to engaging in a separate line of activity that brings additional liability. In this instance, the formation of a new company would be preferable.

  • Thanks, this is good info.
    I have been signing: Jane Doe as member, XYZ LLC
    So this is not good enough and instead I should sign: Jane Done on behalf of XYZ LLC as it’s member/manager?
    It just seems a bit tough to fit on a lot of forms…

  • Clint – does this hold for checking accounts too? The account is in the name of the LLC.

  • Do you have to be a manager managed LLC in order to sign as manager? My situation is that my NV LLC is the sole member of my AZ LLC. When signing docs for my AZ LLC I am having trouble signing. All I can come up with is “… as member, NV LLC, the sole member of AZ LLC.” This seems a ridiculous way to sign loan contracts, set up bank accounts etc. I think I need to be able to sign as Manager, AZ LLC. Do I need to change to a manager managed LLC in order to do that? Or can my member managed LLC give me authorization to sign as manager?

    Thanks!

    • Cindi,

      The answer to your question depends on your AZ LLC operating agreement. If your operating agreement provides for the hiring of a manager then yes, you may possibly be able to accomplish that which you describe above. However, if it does not then you should consider changing your AZ LLC to a manager managed limited liability company and appoint yourself as the manager.

  • I think my lease signature may be just short of limiting my personal liability. ABC, LLC is typed as the Lessee, with “by:” at the signature line and, John Doe, Managing Member typed under the line. Unfortunately I only signed my name. Does the “Managing Member” under my signature protect my liability?
    If after the contract is signed, I leave the LLC as a member, am I still liable for the lease?
    Thanks

    • Zane,

      Yes, the managing member under your name does limit your exposure. This is how a person typically signs on behalf of their entity.

      So long as you did not give a personal guarantee then you are not liable for the lease.

  • Thank you so much Clint! One last scenario here. Doesn’t the signature block detail out all of this information? For example, here is my signature block below on consulting contracts:

    For John Doe Holdings LLC:
    Signature: John P. Doe
    Name: John P. Doe
    Title: Managing Consultant
    Date: December 16, 2013

    If that is not good enough then how about simply putting “John P. Doe, Managing Member” for the signature.?

    Thanks Clint!

    J

  • Thank you for this info Clint.

    I know the post is a bit older, but I hope you can answer. I’m finding a lot of conflicting info online.

    How would i sign a bank check when I’m paying someone or paying myself? (from member managed, single owner LLC)

  • I need confirmation on signatures to checks. As an assistant to the owner or an LLC, is it legal for me to sign my name to a check at the Owner’s request? Do I need a written documentation stating the authorization? Will bank reject if I’m not on a signature card?

  • I would like to form a Nevada Limited Liability Company (LLC). Or perhaps a shelf corp (LLC) I’f possible? The LLC will not housing real estate. The primary function will be housing a residential & commercial landscaping company. I do have some specific verbiage that I would want the Operating Agreement to contain? Is that possible or is it “cookie cutter” style. I want the LLC to be Manager/Managed, 51℅/49℅, two (2) members, private corp docs only as I want the Nominee Service. Thank you in advance for your time regarding my very near future LLC. Oh and btw….. I am going to the SOS tomorrow morning to reserve the name.

    • Melissa,

      What you ask can be created. If you are going to handle the filing on your own then you will need the nominee set up prior to filing the list of managers. If you would like our assistance please call 800.706.4741 and ask to speak with an advisor to establish a NV LLC. You can also tell my office I told you to call.

      • Perfect. Thank you for both your quick response and the state filing step I would have missed. Is here a particular “advisor” I should speak with? Maybe just a secretary would be fine.
        Thanks again

  • Dealing with a law firm (LLC) that insists on signing their documents with the name of their LLC (“Acme LLC”) instead of a member of the LLC (“John Doe, on behalf of Acme LLC).

    Does this create issues?

    • I am not sure how the firm will sign on behalf of the LLC without indicating your representative capacity. Always sign in a manner that puts everyone on notice they are dealing with the LLC and not you personally. For example: Clint Coons on behalf of Acme, LLC as its Manager or Clint Coons on behalf of Acme, LLC as its Managing Member.

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