Corporate Representative Authorized to Make Decisions
Welcome to Bylaws 101, your guide to understanding the intricacies of corporate governance. Today, we're delving into the important topic of who has the authority to bind a company in contract.
In the realm of business, this question is primarily determined by the company's management structure and the specifications outlined in the company's Bylaws (for corporations) or Operating Agreement (for Limited Liability Companies - LLCs).
Member-Managed vs Manager-Managed LLCs
In a member-managed LLC, any member typically has the authority to bind the company, unless restricted. However, in a manager-managed LLC, only the appointed manager(s) have the authority to bind the company, as defined in the Operating Agreement.
The Operating Agreement: The Key Document
The Operating Agreement is the cornerstone document that determines binding authority. It sets out the governance structure, management roles, and decision-making powers. For instance, it may give "sole authority" to one or more managers, or require joint consent among members for specific actions. It can also define thresholds, such as limiting a manager’s power to incur debt or mortgage assets without member approval.
Since operating agreements are private and vary from one LLC to another, verifying authority requires a review of the current, valid Operating Agreement itself.
Authorizing Signatories
If the Bylaws or the Operating Agreement are silent on the issue, the Board (or all members) can adopt a resolution authorizing certain person(s) to sign on behalf of the company. In some cases, all members or shareholders can sign on behalf of the company without further resolutions or approvals.
Personal Liability and Contracts
It's essential to note that when you sign a contract on behalf of a company, the company is liable, not you. This article does not discuss any legal concept related to personal liability for contracts signed by individuals on behalf of companies.
For a more in-depth explanation of corporate bylaws and drafting tips, we recommend checking out the AI Lawyer's explanation, available at: AI Lawyer's Explanation
Sergei Tokmakov, an AI Lawyer-paralegal, is a valuable resource for those seeking further guidance on this topic. You can reach him at Sergei Tokmakov's Email or visit his website at Sergei Tokmakov's Website.
In California, the concept of binding authority is outlined in Corporations Code Section 208(b) and Section 313. However, this article does not discuss any legal concept related to personal liability for contracts signed by individuals on behalf of companies, nor does it provide specific information about the social media platforms (Facebook, Messenger, Twitter, Pinterest, LinkedIn, Whatsapp) in relation to the topic of bylaws.
In conclusion, to know who can bind the LLC in contract:
- Check if the LLC is member-managed or manager-managed.
- Review the Operating Agreement provisions on management and contract-binding authority.
- Look for any restrictions or required consents for binding actions.
- Ensure authority aligns with what is granted explicitly in that agreement or possibly the articles of organization.
In the realm of business, the authority to bind an LLC in contract is primarily determined by the company's management structure and the specifications outlined in the Operating Agreement. For instance, in a manager-managed LLC, only the appointed manager(s) have the authority to bind the company, as defined in the Operating Agreement. In a financial aspect, the Operating Agreement is crucial as it specifies the governance structure, management roles, and decision-making powers, including who has the authority to sign contracts on behalf of the LLC.
