One important pointer for new small business owners that is never stressed enough is the importance of clearly identifying your company as the party to all your company’s contracts. This is relevant at the opening and the end of each contract.
First, the contract should clearly identify the company as the contracting party. For example, in the opening of the contract, or on the applicable line of a form contract, the party should be identified as “Doe Industries, Inc., a Florida corporation,” and never as “John Doe” or just “Doe.”
Second, and where more problems arise, is in the signature section. Often new business owners will sign just their name with no designation of their title or capacity for the company. In the case where a contract with Doe Industries, Inc. is signed by John Doe, it becomes unclear whether John Doe, individually, is also a direct party or is guaranteeing the obligations of Doe Industries, Inc. Even worse, if the parties were not clearly identified at the opening, or the contract refers to “the undersigned,” then all of a sudden John Doe, individually, appears to be the contracting party. In the event of a default, John Doe has lost his corporate liability protection and is now subject to personal liability under the contract. The name and signature should always be accompanied by the title of the signatory and the name of the company. For example, “Doe Industries, Inc., a Florida corporation, by John Doe, its President” or “John Doe, in his capacity as President of Doe Industries, Inc.”
This issue can also be compounded when applying for a fictitious name. For example, if John Doe files a fictitious name registration for “Doe Group” and lists the owner as John Doe, rather than Doe Enterprises, Inc., Doe Group will be an alias for John Doe, individually, essentially creating a sole proprietorship. If John Doe then enters a contract as Doe Group, he has entered the contract individually (as John Doe d/b/a Doe Group), and not on behalf of Doe Enterprises, Inc.
There are limited defenses available when these mistakes arise. However, the sound business practice is to not leave this fundamental matter to interpretation or possible dispute. When in doubt, contact a Florida business law attorney.
