Learn more about what a corporate seal is in business.
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How does someone know whether a legal document from your business is valid and official? Maybe a signature from an officer proves it’s valid. Maybe a notarized signature from an authorized representative makes it official. Sometimes corporations show their legal documents are official and valid with a corporate seal. Below, we take a look at the corporate seal definition and why a business might use one.
The corporate seal definition has its roots in a long history. The seal normally signifies that a corporate action is valid. A corporate seal can be a unique symbol that represents your company, and it can be displayed in many different ways, including:
In many cases, a corporate seal goes next to a corporate representative’s signature on important legal documents and agreements.
States no longer require corporations to have a seal, but it can still be useful. Among corporate seal benefits is the fact that the seal is a unique identifier that can protect your business from fraudulent or unauthorized activities.
How can the seal protect your business? You can require in your corporate bylaws or formation documents that agreements for major transactions bear your unique corporate seal to be valid. You can then limit access to your corporate seal to a handful of trusted officers and agents. If an unauthorized individual from your corporation enters an “unsealed” agreement on behalf of the business, you might be able to argue that the agreement is invalid. In many cases, legal liability for an invalid business agreement falls on the unauthorized individual alone, not the business.
But you don’t want to rely on only seals and symbols for protection. It’s important to speak to an attorney about the best ways to safeguard your business against fraud and unauthorized activity.
Using a corporate seal can cost your business more money and take up more of your time. But sometimes a seal is well worth the inconvenience.
Depending on how you choose to affix your corporate seal to documents, you might have to spend additional money on equipment like embossers, software, stampers, and ink. You might also have to hire a graphic designer to create a seal that is to your business’s liking.
Making sure officers and agents have the corporate seal with them for transactions can take more time out of the business day. It can also take extra time at the beginning to design the seal and create equipment to reproduce it on documents.
A big part of having a corporate seal is knowing who to trust with it. If your seal gets into the wrong hands, someone who misuses your seal could bind your corporation to undesirable agreements. It’s important to let only people you trust use your seal and to effectively lock the seal away from others.
A corporate seal is like a fancy signature for your business as a whole. Corporate agents may come and go, but your seal as a marker for approved business activities can last forever. Requiring a seal on legal documents is a great way to protect your business against unapproved agreements and transactions. However, if your small business doesn’t have the time or money to create and protect a corporate seal, it might not be the best option for you.
There are many steps to forming and running a successful business, and we can be there to support you from beginning to end. If you want to form a limited liability company or corporation, we can make it easy with our Business Formation Service. We also provide several business support services to help you keep your business running smoothly. Successful businesses rely on good help, and we provide the help you need.
Disclaimer: The content on this page is for informational purposes only and does not constitute legal, tax, or accounting advice. If you have specific questions about any of these topics, seek the counsel of a licensed professional.