Does a Non-Member Have Power to Sign on Behalf of a Limited Liability Company?

By Joe Stone

A limited liability company (LLC) is a legal structure that can be used to operate a business. All states authorize the formation of an LLC. The uniqueness of the LLC is its ability to protect the owners -- called members -- from the debts of the business, similar to a corporation, and still provide the members with the management flexibility of a partnership. By adopting a properly drafted operating agreement, the LLC members can establish a management structure that best suits the needs of the LLC, including authorizing nonmembers to act on its behalf.

Manager Members

As a rule, the default management provisions of a state's LLC statutes vest management authority in all LLC members. The authority of each member will be in proportion to the member's capital contribution; that is, the member's authority to manage the LLC is commensurate with the member's ownership interest. In this situation, a nonmember would not have authority to sign documents or enter into contracts on behalf of the LLC.

Designated Managers

A hallmark of all state LLC laws is the ability of the members to choose to alter the default management provisions of the LLC law. The LLC members can make this choice by specifying the LLC's formation document -- usually called articles of organization -- that the LLC will vest management authority in a designated manager or managers. The LLC members also can adopt an operating agreement that includes a designation of managers. A designated manager will have authority to sign on behalf of the LLC. A manager does not have to be an LLC member.

Delegation of Authority

State LLC laws that permit delegation of authority by members or managers can be used to delegate signing authority to a nonmember who is not a designated manager. Such delegated signing authority is more likely to be used for a limited purpose that is part of a nonmember's job duties, as opposed to general signing authority for the LLC. In this regard, the management structure will be more akin to a corporate management structure with designated employees acting in specific management positions such as treasurer or vice-president.

Operating Agreement

A written operating agreement is generally not required to form an LLC in any state except New York and Missouri. However, an LLC with multiple members and a designated manager or managers should give consideration to adopting a written operating agreement that comprehensively sets forth the LLC management structure and any delegation of signing authority. Such a document is useful in avoiding internal controversy between LLC members and managers, as well as useful to third parties dealing with the LLC, such as government offices and financial institutions that want verification of a person's authority to act on behalf of the LLC.

About the Author

Joe Stone is a freelance writer in California who has been writing professionally since 2005. His articles have been published on LIVESTRONG.COM, SFgate.com and Chron.com. He also has experience in background investigations and spent almost two decades in legal practice. Stone received his law degree from Southwestern University School of Law and a Bachelor of Arts in philosophy from California State University, Los Angeles.

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