Tanya S Osensky
How To Sign a Contract
Jake owns a cleaning company, and he buys cleaning supplies from a large corporate supplier. The supplier sent a contract to cover an order for $5,000 in supplies. The contract seemed pretty simple, requiring half due on signing and the rest a month later, so Jake signed it.
A month later, the balance was still unpaid due to a cash flow problem. So, the supplier sued Jake. Jake went to court and argued that he couldn’t be sued because he had formed his LLC to protect his personal assets.
The court ruled against him because of the way he signed that contract. A very simple change in the way the signature section of the contract was written would have saved Jake from this threat to his personal assets.
I see this most basic thing done wrong almost every day.
Here's the right way to set up the signature for a contract with a company:
Doe Consulting Services LLC
By: [signature line]
John Doe, President
Businesses must act as entities separate from the people that run them, and evidence of that is consistent use of the actual legal name of the company (exactly as filed with the state where the company was started). Using the example above, it should not be listed as "Doe Consulting Services Inc." or "Doe Consulting" or "Doe Consulting Services" - it should be the whole name "Doe Consulting Services LLC."
The individuals who sign the contract on the company's behalf should be listed by name and title indicating their status with the company. Not just "John Doe" without the title.
If the contract lists the company incorrectly, or if John Doe signs the contract without setting up the signature block in the way shown above, it appears that he is signing on behalf of himself, leaving his personal assets at risk.