Does an LLC Operating Agreement need to be notarized?

December 14, 2017 - Posted by: admin - In category:

taxes - 2

No. At least in the normal course to have a valid LLC operating agreement, you are not required to have it notarized. At least that is how it works in Utah and most other states of which I am aware. Remember that LLCs are creatures of applicable state law, so if you are forming a Utah LLC, you need to comply with the Utah LLC Act a/k/a Utah Revised Uniform Limited Liability Company Act in the formation and operating of your LLC. While there may be unique circumstances where you would need to have your LLC operating agreement notarized[1], those would be rare circumstances indeed.[2]

Even though it is not a requirement to have the signatures on an LLC operating agreement notarized, there is no harm in doing so. For some reason I do not quite understand, some people tend to take a greater measure of comfort in knowing that a signature has been notarized. So if you or someone else fall into that category where you just prefer to have your signature and that of your other co-owners of the LLC notarized, go for it. Not required, but also no harm in doing so.

I saw another blog post where someone had asked a similar question about notarization of the signatures on an LLC operating agreement and some attorney, accountant or other professional (it was difficult to know for sure) had suggested that instead of notarization, they should be sure to initial at the bottom of each page of the document and that doing this would someone add a greater measure of “protection” against fraud, etc. Hmmm….that is another head-scratcher for me. Look, fraud is fraud. So, if someone is inclined to forge a signature on the last page of a legal document, that same person can easily forge your initials on one or more pages in the middle of a legal document. Likewise, and this may get me on the nasty-person-list for various notary organizations, if someone is going to engage in fraudulent activities, that person can most likely find a way to forge or otherwise borrow a notary stamp/signature. What’s more, it would be incredibly easy for just about anyone to become a notary themselves—then just use their own notary stamp in the forgery/fraud—assuming such a person were so inclined.

Am I saying that notarization is without value and should never be used? No, I am not saying that. However, I am saying that notarization is no panacea of protection against forgery and fraud. Likewise, the archaic practice of parties initialing each page is just that—outdated and, frankly, silly (in my view). Let me say it again—if someone is going to engage in fraud and forgery, why could they not forge someone’s initials? The answer is that they could, and it is not really all that difficult. This is among the many reasons why I have become a big fan of electronic signatures and the various vendors who offer e-signature products. Adobe is my favorite, but there are many good options. I have written a prior post on the pros and cons of electronic signatures (click here to read).

I acknowledge that Adobe e-sign or other similar products are also not a panacea of protection against every effort to commit fraud. However, I believe that using one or more of these electronic signature options makes fraud more difficult and easier to trace and discover. Why? When I use Adobe for e-signatures, once the document is e-signed, it becomes a locked and encrypted pdf document, complete with a certificate at the end of the document showing the IP address of the computers used, exact time and other key information. This then prevents a party from being able to substitute altered pages later (if we rely only on the electronic version of the document in our dealings—I understand that a party could still print the papers and do bad things that way). This also gives an excellent trail of evidence for tracking down bad acts and bad people if there has been fraud and forgery.

To summarize: you are not required to have the signatures on your LLC operating agreement notarized to have a valid and enforceable LLC operating agreement. You may still choose to get signatures notarized and use the old “initial each page” method of execution of the agreement. If that makes you feel better—go for it. But also realize that fraud is fraud and neither notarization or initialing is going perfectly and completely protect against fraudulent activities.
Ryan L. Jensen
Pharos Law Group, PLLC
Salt Lake and Logan, Utah

[1] or, more correctly, the signatures on the operating agreement–I did see an internet post where an attorney was VERY careful to make that distinction…:) It is true that signatures are notarized, not documents. Gota love attorneys…?

[2] Perhaps there would be a need to submit an operating agreement for recording with the applicable county recorder? But again, this would be a rare circumstance, in my view.

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