At one time, deciding what the corporate seal would look like was an important part of the incorporation process. It was one of the steps taken in the corporation’s first directors’ meeting, along with appointing officers, approving bylaws, issuing stock certificates, and other steps that were required to be taken before the corporation started doing business.
The benefits of corporate seals and company seals
Today, corporate seals are no longer required by state corporation laws. But they still are very useful, and many corporations still place their corporate seals on their important internal and external documents. And, in fact, many LLCs also use company seals on their important documents.
What is a corporate seal or company seal?
A corporate or company seal, in a way, is a corporation’s or LLC’s signature. And just as an individual signs a document as evidence that he or she has approved the document and that it is authentic or official, a seal is used to show that the corporation's or LLC’s documents were authorized by management and are official or authentic.
Seals can be affixed to internal documents — such as ownership certificates, bylaws, operating agreements, resolutions, and minutes. They can also be affixed to external documents such as agreements entered into with vendors, lenders, suppliers, employees, and other contracting parties.
Although a corporate seal or company seal can be designed and ordered at any time, it is still often ordered shortly after formation. This is particularly true if the corporation or LLC wants to stamp its seal on its ownership certificates. The seal will typically include the name of the corporation or LLC, year of formation, and state of formation.
What is the legal effect of a seal?
The legal effect of using a corporate or company seal may differ depending upon state law. It may be considered proof that the document was authorized, or it may provide some evidence of the authenticity of a document but may not be proof, in and of itself, that the document is authentic. And in some cases, it may be purely a symbolic gesture with no legal effect on validity.
Why should a corporation or LLC have a seal?
Even if the corporation and LLC statutes do not require the use of seals, and even if they may not be conclusive proof of authenticity, there are still many reasons why corporations and LLCs will want to have a seal. These include the following:
- A state agency may require the businesses they regulate to use a corporate or company seal
- Vendors or lenders may require it on their contracts with the corporation or LLC
- Banks may require it for their entity account holders
- A seal may be required on deeds
- Having a seal affixed to a document can help prevent fraud, as someone attempting to use a counterfeit document presumably would not have access to the corporate or company seal
- Using a seal makes the corporation’s or LLC’s documents stand out
- Symbolic gestures of authenticity can also be appreciated, particularly by recipients of internal documents such as shareholders and members
What is a corporate kit?
The seal is also often included as part of a corporate kit and often can be obtained from the corporate service provider that assists with the formation. Although corporate kits can differ depending upon the vendor they are purchased from, they generally include a binder with the name of the corporation or LLC, in which you can keep important records. A corporate kit may also include stock or membership certificates, a transfer ledger, and sample minutes, resolutions, bylaws, or operating agreements.
A corporate seal or company seal can be placed on certificates, agreements, and other documents as a sign that they were authorized by the corporation or LLC. Every corporation or LLC (or other entity type for that matter) should consider whether they want to have a seal. Whether they use it all the time, or just for a few special certificates or agreements, a seal can be a very useful tool.