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Operating your business through a corporation reduces your personal liability for actions taken by a business. If a disgruntled client wants to sue, he or she will, generally, only be able to sue the corporation and not you, personally. Your personal assets (like your house) are separate from your business assets and are therefore protected. If you incorrectly sign contracts, you risk losing the limited liability and such an error can result in personal liability attaching to you. A corporation is required to set out its full corporate name (not a registered Business Name) in legible characters on all contracts, invoices, negotiable instruments (including cheques) and orders for goods or services issued or made by or on its behalf. To correctly indicate that the party signing a contract is a corporation, the signature line should be completed as follows (for example):

ABC CONSULTING SERVICES INC. Per:    ___________________________________Jane Smith, PresidentI have authority to bind the CorporationIf your corporation has a registered Business Name, use one of the following signature lines (for example):ABC CONSULTING SERVICES INC.operating as UNIQUE BRANDSPer:    ___________________________________Jane Smith, PresidentI have authority to bind the Corporation            ORUNIQUE BRANDS, a division ofABC CONSULTING SERVICES INC.Per:    ___________________________________Jane Smith, PresidentI have authority to bind the CorporationThe person signing on behalf of a corporation must have the proper authority to do so.The granting of authority to execute documents is generally dealt with in the corporation’s by-laws (ie. President or Secretary may sign any contract).  In addition, directors have power by resolution to appoint any officer or officers or any person or persons on behalf of the corporation either to sign contracts, documents and instruments in writing generally or to sign specific contracts, documents or instruments in writing. [Note that there are other ways that personal liability can attach to directors of a corporation including:  if a corporation fails to pay tax, the directors are responsible to do so; if a corporation fails to pay employees, the employees can sue the directors; if a director acts fraudulently on behalf of the corporation, he or she can be personally liable; or, if a corporation causes environmental damage, the directors can be held personally liable for the damage.]

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By Denise Robertson posted in Firm News & Events on Wednesday, September 21, 2011.

About the author

Mills & Mills LLP was proud to sponsor a hole at yesterday’s Yonge Bay Bloor Association/Toronto Midtown Business Association’s golf tournament at Wooden Sticks. It was a beautiful day for golf! We had two foursomes play in the tournament and despite some bogeys and lost balls, fun was had by all!

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