The primary reason most people elect to do business in the corporate form is to obtain limited liability for the activities of the business. Generally speaking, liability for contractual obligations and damage claims is limited to the net asset value of the corporation, thus shielding the assets of the shareholders from such claims. There are exceptions, such as fraudulent or intentional conduct, where the officers and shareholders of a corporation can be held liable personally. In most cases, however, the “corporate veil” will protect shareholders from personal liability.
If you have chosen to operate your business in the corporate form, it is important that documents signed on behalf of the corporation be signed in the proper manner so as to insure limited liability.
Corporate documents are signed by corporate officers, typically the president or vice president, secretary and/or treasurer. Many printed form documents provide for execution by the president and secretary. When signing documents on behalf of a corporation, the signatory should always:
- show the full proper name of the corporation above the signature line;
- the name of the corporate officer signing for the corporation should be shown;
- the officer’s title (president, vice president, secretary, treasurer etc.) must be indicated next to the signature.
Although the rules on affixing a corporate seal to documents reflecting corporate obligations have been relaxed, we continue to recommend that the corporate seal be affixed as additional evidence that a corporate signature was intended by the signatory. In a similar vein, we recommend care to insure that the corporate designator (Inc., Company, Co., Ltd. etc.) always be included in the corporate name to put third parties on notice that they are dealing with a corporation and not an individual or an unincorporated entity.