Business Entities as Clients: Who Signs for an LLC?

By
Real Estate Broker/Owner with Providence Group Realty TREC# 0608931
https://activerain.com/droplet/4hpY

Proper LLC signatures include your name, business title and company name.A common error we see in everyday real estate practice stems from confusion about how documents should be signed when the customer or client is a business entity (LLC). Also known as 'signature styling', this is an important element to understand for contract preparation. 

There is a short list of contracts that Realtors use in daily practice where it is especially important to know how to properly style a signature when the client or customer wishes business to be transacted under a business name. These include, but are not limited to: 

  • Buyer Representation Agreement
  • Listing Agreement
  • Lease Agreement
  • Independent Contractor Agreement 

Why is this important? 

For consumers:  The primary reason individuals form an LLC is to eliminate risk by limiting personal liability. With so many boxed and online solutions for creating LLCs, do-it-yourself methods of forming a company may not provide a consumer with the same operational guidelines or counsel that would come from working directly with an attorney who could advise on such matters.  

We find that many business owners neither understand signature responsibility nor proper protocol that establishes they are signing on behalf of the company --and not as an individual. Signing legal documents incorrectly not only creates exposure for all of your personal assets (such as real property, personal property, bank accounts), but may also invalidate the legitimacy of a legal document. 

For Realtors:  On a purchase agreement, the way a buyer is named on a contract will customarily dictate how name is taken in title.  Likewise, when it comes to listing or leasing properties, realtors have a duty to know that the individual(s) who are party to a transaction have the legal right and authority to engage in that transaction. Tenants also have a right to know the identity of their landlord. By ensuring that signatures are properly styled, we are serving our clients' interests, complying with licensing requirements, and abiding by ethical and competency standards for practice. 

Bottom Line: Signatures must be obtained from authorized individual(s) of an entity, and must styled correctly. 

So, as a realtor, how do I know what name to write on a contract, and who needs to sign? -- Or how do I know that the agent on the other side of a transaction got it right for their LLC clients? 

Start by securing a copy of the company's Articles of Organization and Signatory Resolutions. This will establish: 

  • The correct, full legal name of the LLC
  • The members of the LLC
  • The correct LLC business title for each member (e.g., 'member', 'manager', 'CEO')
  • Which member(s) can or must sign to create a binding agreement in the name of the LLC 

A savvy realtor may also fact check entity registration and good standing by cross-referencing public information through the Secretary of State for the state in which the business was formed.  This tip can help protect your valuable time by validating the company's existence through proper filing, as well as to provide insight on business practices and possibly character. If a company is not in good standing, take caution. At the end of a transaction, your good name will be on the line right along with your client's. 

Note: both realtors and their clients should be prepared and willing to share this information with cooperating brokers, lenders, title companies and customers who ask for proof of identity. LLCs are not veiled curtains for individual parties to hide behind, and these documents should not be withheld or 'protected' under 'privacy' claims. Investors or landlords who operate in this manner should start alarm bells sounding in your head. 

Rule #1: Companies cannot sign for themselves. 

One of the MOST ridiculous things we have ever seen is where a listing agent hand-wrote the name of her client's company on the signature line of a lease agreement, and tried to pass it off as an executed contract.  Not only was this fraudulent activity on her part, but it was also completely incorrect for proper legal styling.

Proper LLC signatures will include the name of the individual signing, followed by that person's business title and the full legal company name. 

Example: "Ima N. Vestor, Member, Million Dollar Mansions, LLC

Rule #2: Initials should match the name of the individual signing. 

Another common point of confusion we see -- especially relating to digital signatures -- is that individuals will try to write in company initials instead of their own personal initials. Line items requiring initials should reflect those of the individual signing. So, using our example above, we would expect to see Ima N. Vestor's intials as "INV" -- not "MDM". 

Hint: This same rule applies if the signing party is an executor of an estate, or power of attorney. Remember, individual people -- not companies, buildings, trusts, or roles -- sign documents. 

Rule #3: Personal Signatures Are Needed for Personal Guarantees 

If an agreement is being personally guaranteed, a personal signature, in addition to an LLC signature, may be required. 

Rule #4: All required signatures must be included to bind an agreement

If the signatory resolutions for the LLC require that ALL members must sign for a document to be legally binding, then ALL members must sign and initial the contract before it can be executed. 

The resolutions spell out the authority of members, and whether or not one individual has the power to bind the LLC in legal agreements where signatures are not required for additional parties (members). 

If all members' signatures are required, and only one member signs, you don't have a deal. 

Summary 

When in doubt, seek the advice of an attorney or tax professional. We find that our title company partners are invaluable resources when it comes to signature styling and ownership vetting.

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Re-Blogged 2 times:

Re-Blogged By Re-Blogged At
  1. Mike Wong 06/01/2014 07:05 AM
  2. Lynn B. Friedman 06/01/2014 07:11 AM
Topic:
Real Estate Best Practices
Location:
Texas Collin County Plano
Groups:
Collin County, TX Real Estate Professionals
Dallas, TX Real Estate Professionals
Texas Independent Broker Network
Tags:
signature styling
llc
business entity
signatory roles
who must sign
realtor responsibility
binding

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Show All Comments
Rainmaker
310,508
Mike Wong
Keller Williams Realty Southwest - Sugar Land, TX
Realtor: Commercial, Residential, Leasing, Invest

Excellent post Amanda. I had to reblog and share it. LLCs are common in commercial real estate and getting even more popular as savvy residential investors are in the market for properties as well. 

Properly establishing an LLC is critical and best left to professionals, rather than a generic online starter kit that may not be state specific. 

Jun 01, 2014 07:11 AM #5
Ambassador
1,654,850
Jennifer Fivelsdal
JFIVE Home Realty LLC | 845-758-6842|162 Deer Run Rd Red Hook NY 12571 - Rhinebeck, NY
Mid Hudson Valley real estate connection

Amanda excellent information.   The purpose of such an organization is to limit liability which can only be achieved with the correct authorized signature for LLC

Jun 01, 2014 07:26 AM #6
Rainmaker
1,317,807
Joan Whitebook
BHG The Masiello Group - Nashua, NH
Consumer Focused Real Estate Services

I see these types of mistakes from time to time.  I think it is best for folks to check with an attorney.  There may be other documents that have come into existance after the initital document have been drawn up. 

Jun 01, 2014 07:49 AM #7
Rainmaker
163,100
Amanda Thomas
Providence Group Realty - Plano, TX
​Broker, SRES®, BPOR, MCNE, ​Certified DRS Agent™

@Than, we see that, too! :-) For many, buying a home in the name of their LLC is the first business introduction they get to styling rules and signatory roles.

@Joe, thank you SO much for sharing your perspective from Oklahoma practices. Our 'Texas' lens may not translate perfectly to other states. :-)

@Mike Wong, thanks for the re-blog! You speak the truth! LLC in a box isn't all it is cracked up to be. Much like Than's feedback sharing how unfamiliar most consumers are with how to properly leverage the LLC, it pays to have a professional help set everything up so that the effort will serve the intent.

@Jennifer, absolutely! Acting in a way that negates the benefit seems almost... crazy! What we don't know can hurt us!

@Joan, excellent point! To your credit, this needs to be on the radar of Realtors from coast to coast. Taking things for granted can be a costly mistake.

Jun 01, 2014 08:51 AM #8
Rainer
47,950
Kim Norton
CREATIV Real Estate Solutions - Bentonville, AR
Selling Northwest Arkansas

Congratulations!  You rock!

Jun 01, 2014 09:36 AM #9
Rainmaker
163,100
Amanda Thomas
Providence Group Realty - Plano, TX
​Broker, SRES®, BPOR, MCNE, ​Certified DRS Agent™

@Kim Norton, thank you! But, I think between the two of us, we both know which one of us is musically gifted... (That would be YOU!!) <3

Jun 01, 2014 09:56 AM #10
Rainmaker
246,751
David Pylyp
RE/MAX Realty Specialists Inc., - Toronto, ON

Excellent  post! 

In Ontario Canada a Buyer that is an LLC is required to present their Articles of Incorporation ( as you stated the Articles of Organization)  The Minute Books are also required to be up to showing the resolutions that authorise that Signing Officer.

Its getting trickier to stay aheadof the curve.

Thank you for a great topic!

 

Jun 01, 2014 10:44 AM #11
Rainer
111,448
Allison Bernard
Keller Williams Central Rhode Island - East Greenwich, RI
Real Estate & Relocation Services 401-533-6916

Great post.  I joined AR for discussions like this.

Jun 01, 2014 11:22 AM #12
Rainmaker
2,895,658
Laura Cerrano
Feng Shui Manhattan Long Island - Locust Valley, NY
Certified Feng Shui Expert, Speaker & Researcher
Thankfully, almost all the companies I have done work for have put in place the right people to handle this. Anything else is just bad logistics.
Jun 01, 2014 01:39 PM #13
Rainer
7,895
BlueGrape Home Staging
BlueGrape Home Staging - San Diego, CA

Well put together Amanda. Very common with a lot of investor firms where there is an LLC operation.

Jun 01, 2014 05:23 PM #15
Rainmaker
854,746
Chris Griffith
Downing-Frye Realty, Bonita Springs, FL - Bonita Springs, FL
Bonita Springs Listing Agent

Super article.  We have so many investors with LLC's in this area.  Great advice for both the buyers and sellers side especially in this fast paced market.

Jun 01, 2014 08:03 PM #16
Rainmaker
163,100
Amanda Thomas
Providence Group Realty - Plano, TX
​Broker, SRES®, BPOR, MCNE, ​Certified DRS Agent™

@David - when title companies are involved (sale or resale), the need is typically met through their involvement, even when an agent misses the mark. It is really for the benefit of the landlord and tenant relationship, as well as for realtors who are in the process of vetting prospects, that this information becomes valuable at an individual level. I love that you shared the Canadaian requirements!! I believe minutes are an optional requirement for LLCs in the States, depending on how the company is organized.

@Allison, thank you for your feedback. The times when I have been most stuck, AR has provided clues where no others existed. ;-)

@Laura, Feng Shui is on your side! :-)

@Pramiti, thank you so much, and you are so right! Welcome to ActiveRain! I just caught your first post, The ABC of Home Staging - Staging a house to sell. A worthy read!

@Chris, thank you for your insight, and for hitting on one of the most important (understated) points... BOTH sides are responsible for making sure it gets done correctly. The LLC client might not belong to us, but what the LLC client's agent doesn't know can hurt our clients if we aren't on our toes. :-) 

Jun 01, 2014 09:11 PM #17
Rainmaker
1,421,677
Michael Setunsky
Woodbridge, VA
Your Commercial Real Estate Link to Northern VA

Amanda, when dealing with commercial real estate sales and leases, a corporate resolution is a must to insure contracts and leases are properly signed.

Jun 01, 2014 11:15 PM #18
Rainer
52,366
John Jonas
ReplaceMyself - Virtual Assistants - Highland, UT
John Jonas

Amanda, great post. A lot of nice information one can learn from here. Keep it up!

Jun 02, 2014 12:02 AM #19
Rainmaker
784,512
Olga Simoncelli
Veritas Prime, LLC dba Veritas Prime Real Estate - New Fairfield, CT
CONSULTANT, Real Estate Services & Risk Management

Great post! There is so much ignorance on the subject. Even large banking institutions have gotten into trouble by not checking signatures or making sure the individual signing is actually authorized to sign a particular document. If not, a contract is VOID.

Jun 02, 2014 01:04 AM #20
Rainer
482,347
Bruce Kunz
C21 Solid Gold Realty, Brick, NJ, 732-920-2100 - Howell, NJ
REALTOR®, Brick & Howell NJ Homes for Sale

Hi Amanda. I've not had a problem (so far) but will be more vigilant going forward (especially now I know so much more about what to look for!).
Thanks for sharing,
Bruce

 

Jun 02, 2014 04:12 AM #21
Rainer
448,594
Dan Hopper
Dan Hopper - Gold Way RE - Westminster, CO
Denver Broker / Author / Advocate/Short Sale

Great information, Amanda.  It is good to refresh oneself with the proper "styling" when working with and LLC, especially, when we see more of them on the fix n flips.

Jun 02, 2014 07:49 AM #22
Rainmaker
2,564,723
Rebecca Gaujot, Realtor®
Lewisburg, WV
Lewisburg WV, the go to agent for all real estate

Hi Amanada, saw this re-blogged on Lynn Friedman's blog. This is great information and have bookmarked for future references.

Jun 11, 2014 03:11 AM #23
Rainmaker
163,100
Amanda Thomas
Providence Group Realty - Plano, TX
​Broker, SRES®, BPOR, MCNE, ​Certified DRS Agent™

Thank you, everyone, for the positive feedback. :-)

Jun 11, 2014 03:33 AM #24
Rainmaker
1,507,325
Inna Ivchenko
Barcode Properties - Encino, CA
Realtor® • Green • GRI • HAFA • PSC Calabasas CA

Great post!

I have a lease where two tenants want to rent it as LLC.  I need to find the same info for CA...

Mar 21, 2016 08:46 AM #25
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Rainmaker
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Amanda Thomas

​Broker, SRES®, BPOR, MCNE, ​Certified DRS Agent™
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