Signing Business Contracts and Documents and Personal Guaranty and Personal Liability Insurance

Personal Guaranty and Personal Liability Insurance

Signing Business Contracts and Documents

In general, the rule is that a corporation or LLC (limited liability company), if formed correctly, and if all of the formalities required under the law of the state where the entity was formed are followed, does protect you from personal liability insurance contract for business debts and lawsuits. You see, whenever you sign contracts, purchase orders, contractual agreements, leases, loans, mortgages, promissory notes, and most other legal documents involving your business, you need to make sure that you sign your name only in your business capacity. Do not sign your name in your individual capacity. The format that you use to sign your name is the controlling factor here.

How to Sign a Business Document and Contract?

In many cases, you as the small business owner, sign your name without knowing how to properly sign your name to business documents. In fact, most business owners of corporations and LLC’s still sign legally binding agreements in their individual capacity and not as the business.

If you have formed a corporation or a limited liability company, you must remember to sign all liability contracts, agreements, invoices, e.t.c. as an agent of the business. For example, many business owners haphazardly, or perhaps inadvertently, sign legal documents like “Willie Last”. the above signature format legally establishes that you have signed the contract, invoice, loan, or agreement as an individual. And not on behalf of your business.

If you sign your name to agreements in the form depicted in example above, you will be liable personally to meet all of the terms of the agreement. You are therefore subjecting all of your business assets and personal assets to the risk of a lawsuit. If you sign agreements as depicted in the instance above, you will be named personally, as well as your business, in any lawsuit filed against the business. Remember then: signing your name like in example above does not establish that you have signed the personal liability insurance agreement as an agent on behalf of your business.

Pprotecting a business and a personal assets as well from liabilities.

Make sure that you sign any legal documents, letters, memos, invoices, loans, leases as an agent of your business. How must I sign my name to any legal document or agreement to show that I am an agent of my business? Follow the example below:

ABC CORPORATION, INC.
(Name of Corporation)
__________________ by: Willie Last (Your Name)
President (Title)

If you sign your name following example above, you legally establish that you are only signing as an agent on behalf of the business and not in your individual capacity.

Signing a Documents that State Personal Guaranty

A personal guaranty is usually a separate legal document attached to the main agreement. You generally see a personal guaranty contract in a loan, mortgage, or lease. However, sometimes a personal guaranty can be established just by the way you sign the legal document, invoice, lease, or agreement. How? Simple.

If the business liability insurance agreement merely has a signature line that has your individual name on it without any reference to your business name, you are signing the document as a Personal Guaranty. You are therefore personally liable for that agreement if you sign the agreement with such a signature line. But, what do I do if I am being required to sign a Personal Guaranty, like for a business loan or commercial lease for example?

What to do if personal guaranties are required from an individual?

If a personal guaranties are required, you or your lawyer should negotiate a limited period of time (the shortest possible) that the personal guaranty will bind you as an individual. Remember, if you formed a corporation or LLC in the first place, you did it to avoid personal liability and to protect your personal assets. Anyone who does business with your company should, and usually does, know this. So, be careful. Other possibilities can be negotiated too. Just do your best to not sign in your personal capacity by signing a Personal Guaranty.

It’s important to remember to only sign legal documents, invoices, and even letters as an agent of your business (follow the format found in second exampleabove). Who cares about how I sign my name? The answer is a simple one: nobody. Except customers and clients, your creditors, your bank, your mortgage company, your landlord, the IRS and anyone else that wants to sue you (and don’t forget all their lawyers!).

How else can I make sure that I am signing my name properly to all of my business documents? Call your attorney to review all of your agreements, invoices, leases, and legal documents before you sign them. Your personal liability insurance attorney will offer sound advice that protects YOU, your loved ones, and your business. Now, let’s review. What’s in a name? Well… besides your business… it could be all of your personal and family assets!

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