Signing On Behalf Of The LLC

[KingHippo]

I've started making purchases with my LLC's credit card. I read somewhere that you need to sign everything you can on behalf of your LLC instead of just yourself.

Example: After your signature, you should put something like the following: "John Doe, on behalf of Your Business, LLC".

I understand that this can easily be done on a legal contract that is printed out where there is tons of space. However, do I need to do this if I'm making a purchase at a store like Staples or Best Buy?

Like, lets say I go in and I purchase a filing cabinet and use the LLC's credit card. I swipe the card and I get the signature screen. Is putting my name for the signature enough or do I need to write down the on behalf of Your Business, LLC on the electronic signature screen too?

Also, how can I sign something on behalf of the business in an online purchase?

[vangogh]

I'm not sure, but I'd like to know the answer too. From what I understand you do need to be careful about how you sign and which card you use.

[Evan]

On official legal documents, you should be careful about it. But in many contracts, like with a credit card, there is a personal guarantee anyways. So if XYZ LLC goes out of business and you tell Chase "Sorry, XYZ is no longer in business... you can't collect anything, it's an LLC", they can say "Yes we can!"

Most people do not follow that practice of writing "on behalf of". In fact I've rarely seen it followed, though David may have some other tidbits.

I do think it'd be acceptable to signify by putting your title if you have one. So on a check, write "John Smith, CEO" or "John Doe, VP" or "Pres" if you're that paranoid. But I really doubt any business owner that doesn't do this would somehow "pierce the corporate viel."

[Business Attorney]

From a practical standpoint, I think Evan is right. The idea is simply that you clearly indicate that you are acting in a capacity as agent for the entity and not individually.

It is not really a "piercing the corporate veil" issue so much as one of principal and agent. On a company check, for example, it should be clear to anyone that it is a payment by the company. I would not be concerned that someone could come after the person signing the check.

I have several business accounts and generally do not put a title after my name. It doesn't hurt to do so, I just can't see that it is really necessary. On the other hand, for several years I signed many of the checks for a large law firm and used a self-inking signature stamp to "sign" the large stack of checks several times a week. Since it was easy to do so, I did include my title on the rubber stamp.

I think company credit cards are much like checks, except that as Evan noted, there is often a personal guarantee anyway.

On just about anything else, I would recommend adding your title. A few years ago, the telephone company sued the president of a small company that had gone out of business. The young man had taken over the duties for a struggling company after the prior president left. He didn't even own a piece of the business. He signed an order for phones and although the company's name was at the top of the order form, all he did was sign his name at the bottom. We were eventually able to get the suit dropped, but I don't think the phone company would have ever even tried suing the president individually if he had clearly indicated that he was signing in a representative capacity.

[vangogh]

Thanks Evan and David. This issue doesn't really affect me right now as I'm a sole proprietor. I know I'm personally responsible for the business, but lets pretend I am an LLC for a moment.

I do have separate bank accounts for my business and personal use, each with its own checks and credit cards. The accounts are linked together so I can more easily transfer money back and forth.

If I'm understanding right using the check associated with each account is probably enough to show whether you're making a personal purchase or a business purchase. But the business credit is issued with the idea that I'm personally guaranteeing it so if a purchase is made with the business credit card it's essentially the same as if it were made through my personal card. Is that right?

I assume you'd want to make sure business money always came into and out of the business account. How does the linking the accounts to transfer money play into it?

Not really things I need to worry about at the moment, but becoming an LLC has always been something I've considered so any info is welcome.

[Business Attorney]

Originally Posted by vangogh

But the business credit is issued with the idea that I'm personally guaranteeing it so if a purchase is made with the business credit card it's essentially the same as if it were made through my personal card. Is that right?

If you mean is it OK to buy personal items with the business credit card since you are personally guaranteeing the card, I would say no. You should generally try to avoid ANY commingling of business assets and liabilities with personal asset and liabilities.

Allowing direct transfers between business and personal accounts should be OK (it is not really different than writing a check from one account and depositing it in the other, except for speed and convenience), but I would try to keep the actual transfers to a minimum. Make only occasional transfers of relatively significant amounts. For example, instead of transferring amounts from the business account 8 times during the month to cover personal checks, make only one or two transfers. Regularity also helps. For example, transfer the prior month's income around the 10th of the following month on a consistent basis.

One of the factors often used by courts in "piercing the corporate veil" is the owner treating his business like a personal piggybank. Even if you keep immaculate records, I would be fearful that if you simply withdrew money from the business every time you need a few bucks, you could be courting disaster.

[vangogh]

Originally Posted by Business Attorney

If you mean is it OK to buy personal items with the business credit card since you are personally guaranteeing the card, I would say no. You should generally try to avoid ANY commingling of business assets and liabilities with personal asset and liabilities.

What I meant was using the business card for business expenses. Say I needed a new laptop and purchased one with my business card since it's a business expense. My thinking is that would be keeping it a business purchase. When I read your earlier post and Evan's post, I got the impression from "personal guarantee" that you were personally guaranteeing the business card and so could be held personally liable for the expense if the company couldn't repay the card.

I'm not sure if I'm interpreting that right, which is the reason for the question.

That makes perfect sense about the bank transfers. At the moment I don't worry about it as I'm not an LLC, but I can see where were I to incorporate it would make sense to transfer a consistent amount of money from business account to personal account at consistent times (once or twice a month) and to consider that as payment of a salary.

I figured withdrawing money randomly when needed would cause problems. I'm guessing it's mostly issues like that where people get in trouble or maybe forgetting to bring the company card or checkbook to the store so the person card or checkbook gets used instead.

[Evan]

Originally Posted by vangogh

What I meant was using the business card for business expenses. Say I needed a new laptop and purchased one with my business card since it's a business expense. My thinking is that would be keeping it a business purchase. When I read your earlier post and Evan's post, I got the impression from "personal guarantee" that you were personally guaranteeing the business card and so could be held personally liable for the expense if the company couldn't repay the card.

I'm not sure if I'm interpreting that right, which is the reason for the question.

This is correct. But the company needs to be making payments. It's when it goes out of business that they could go after you and that you're personally required to pay it off. As David noted, personal expenses should be kept seperate from business when it comes to credit cards.

[vangogh]

Ok, I understand now. I guess it also helps explain why the first 'L' in LLC is for limited. Thanks guys.

[Evan]

Yes. If it was a No Liability Company, it'd be an NLC! No such luck though, and probably for good reasons.