Who Can Endorse a Promissory Note on Behalf of a Company?

When you open a new business or location, you need startup or expansion capital. You can tap your savings or investment accounts for funding, or you can apply for a loan. But if your company does not have the operating history needed to qualify for a bank loan, you might be forced to turn to family, friends or friendly businesses for financing through the use of a promissory note. As an owner, you can sign the promissory note on behalf of your company, or you can authorize someone else to do so.

A promissory note is a legal written document that summarizes the terms related to your promise to repay funds you borrowed. The promissory note lists the amount you borrowed; the length, interest rate and frequency of payment; and the lump sum payment amount, if any. Because you and the lender can structure a promissory note to meet your respective needs, a promissory note is considered more flexible than many other loan documents. The person or business that lends you the funds is the note holder; as the borrower, you are the note maker.

If you are a sole proprietor, you and your business are considered one and the same from a legal perspective. Therefore, you are the one who endorses all your company’s promissory notes. If your company is unable to repay the loan, you will be personally responsible for repaying the loan.

If you are a partner in a general partnership, you and your fellow partners must agree on who can commit the partnership to a loan and put this agreement in writing. Partners have joint and several liability, meaning that you are legally responsible for liabilities arising from your actions, the actions of the business and the actions of your partners. Without a written agreement stating otherwise, any partner can sign a promissory agreement and commit the partnership to its repayment.

If you operate your business as a limited liability corporation, corporation or other legally separate entity, as the sole member or shareholder you can sign on behalf of your company. If you are the majority owner and an officer, you can sign on your company’s behalf, but many entities will require you to provide proof that you are authorized to do so. Incorporation or organization documents, shareholder or member agreements or written resolutions constitute proof.

Regardless of your business’s legal structure, you can authorize others to sign a promissory note on the company’s behalf. For example, you can authorize certain managers, partners or members. You must craft a one-time agreement or a general written agreement that specifies who can sign, her position with the company and the limit, if any, she can commit the company to. If your company is a partnership, LLC or corporation, all the owners or officers must indicate approval by signing this agreement.