Who Needs to Sign the Document?
Who needs to sign the document? Particularly when it comes to associated entities (corporations, LLCs, trusts) it is important to ensure that you are properly binding the entity and have the correct authority sign off. This can be messed up if the preamble (i.e. the first part of the agreement) or the signature blocks are incorrect.
I also often see staff or advisors signing documents where it is not clear they are signing on behalf of the firm. This is a risk because it exposes your firm to liability, the signor to potential personal liability, and looks unprofessional. Level up your documents with these examples:
1. Determine who needs a contract and who can be combined.
In the advisor’s world, this is primarily based on who is in the household, here are some examples:
- Example 1: Clients are spouses, and one spouse is a trustee for a trust. The trustee of the trust is outside of the immediate family.
- Best Practice: Two contracts. One for the spouses, and a second for the trust.
- Example 2: Clients are spouses, and one spouse has a closely held business where she is the only owner.
- Best Practice: One contract, list individuals and entity in the preamble, and add signature blocks for both individuals and entity
- Example 3: Client is an individual, she is a ⅓ owner of a business with other outside parties.
- Best practice: Two contracts. One for the individual, and one for business. Confirm if other owners need to sign.
2. Ensure that whoever is going to be bound by the agreement is listed in the preamble.
This may look like this:
This Investment Management Agreement (the “Agreement”) is made as of June 1, 2025 (the “Effective Date”) by and between Lacey Shrum (“Client”) and Best Wealth Management LLC, a Texas limited liability company (the “Company”). Each Client and Company may be individually referred to as the “Parties.”
Here, Lacey Shrum is the Client and Best Wealth is the Company. Both the Client and the Company need to sign in the signature blocks.
3. Ensure that the appropriate person signs on behalf of the person or entity bound by the agreement.
Best practices for client:
- Entities sign their own agreement
- Married couples can sign together
- Kids over the age of 18 sign their own
Best practices for firm:
- Make sure person is signing on behalf of firm
- Make sure person has capacity to sign
- Usually best reserved for an owner or C suite
Example signature block for the above preamble:
Frequently Asked Questions
It depends. Usually, who is allowed to sign on behalf of the entity is included in its entity docs. Gauge risk here by the size and purpose of the entity.
- Closely held entities- probably only your individual client.
- Large entities with multiple owners outside one household- one, if not all,of the controlling parties
- Trusts- check the trust document.
- Large retirement plans, etc. – have an attorney review.
Pro tip! Ensure that your agreement states that the signor has authority to sign on behalf of the entity (boring legal jargon that is usually at the end)
Yes, you can still combine assets to calculate billing together.
You can put entities together with the personal accounts of the client. However, be sure to clearly state in the preamble the contract is for both individuals and the entity.
Also, the individual will sign twice – once as an individual and next as authority of the entity.
For larger entities like trusts or multi owner corporations, it is advisable to split.
Maybe! Check with your attorney on what is advisable. Remember that whoever is signing on behalf of your company is legally binding your company. This is a serious responsibility so if an advisor (who is not normally part of running the business) is doing this, ensure that her authority and roles are clear.
For example: you can sign the advisory agreement, but you do not have authority to sign a contract regarding technology data sharing.
Risks of incorrect signing block:
- Unenforceable Contracts
If someone signs a legal agreement without proper authority, the entire contract can be rendered void or unenforceable. That means your firm may have no legal standing to enforce terms or collect fees. - Personal Liability Exposure
If it’s not explicitly clear who the contract is for and who is authorized to sign, the individual who signed could be held personally liable. Yes—their own assets on the line.
- Deal-Killing Delays
When it’s time to sell, merge, or raise capital, every client agreement comes under scrutiny. If contracts are found to be invalid, they’ll need to be renegotiated and re-executed—slamming the brakes on your timeline.
- Regulatory Red Flags
Improper documentation can trigger compliance violations. Without clear authority, your firm may be operating outside its legal bounds—unable to act on behalf of clients or even bill for services provided.
- Reputation Damage
This is basic. Getting it wrong not only signals sloppiness—it undermines trust. It’s the kind of rookie mistake that makes sophisticated partners and clients question your credibility.
I am a lawyer, but not your lawyer. Any legal documents, requirements and items mentioned in this post should be addressed with your legal counsel before making adjustments or relying on this information. This is solely provided for informational purposes to help alert you to potential issues. Smart Kx does not offer legal advice.
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