When you own a business, the way you sign your contract is very important. The “signature block” as it is called, defines who is signing the contract. Though this can seem a little silly, there is a big difference between signing a contract as an individual and signing a contract as an owner of a business.
Signatures define the parties in a contract
Not only should you properly name a party to a contract in the introductory paragraph, but you should also make sure that party signs correctly. There are two primary ways to sign a contract:
As an Individual
Individuals sign contracts as themselves. A typical signature block for an individual looks like this:
If you read a contract for your business and the signature block looks like either of these examples, DO NOT SIGN IT. Ask to have the signature block edited. This is a personal signature. This signature binds a person. It does not bind a business.
As an Entity
Signatures for entities are different. The reason is authority. Any person who signs for a business must have authority to bind the business. Not just anybody can sign a contract. For that reason, the signature block of a company not only names the person signing on behalf of a company (because a company cannot sign for itself, it needs a person with authority to sign for it), but also the position that person holds. A signature block for a business will look something like this:
Service Company, LLC
By: Person’s Name
Its: Person’s Position or Title with the Business
This is useful if your business ever needs to argue that the person who signed had no authority to bind your company. If the person signing has a position like “Janitor” chances are they do not have the authority to sign a contract for the business.
This is good to know whether you are drafting the contract or signing it. If you are signing a contract for your business, make sure you are signing for the business. If the signature block is not a business signature block, you may be binding yourself to a contract. This could be very bad for you. It can destroy any limited liability you may have with your business.
It is also good if you are drafting the contract. You want to make sure, if you are working with another business, that the signature block reflects that. You also want to make sure the person signing has authority to sign. If you are not sure, ask. Ask for their position and ask for proof of their authority. It is better to know before it becomes a question.
So, check your contracts. Make sure you are signing for your business! Protect yourself from liability!