E-signing technology is becoming more and more prevalent, and there is no denying the convenience.  Affixing your signature with a simple tap on your phone screen is a beautiful thing.  After all, the alternative is to print the document, sign it, scan, and then email the scanned copy.  Sometimes you have to go find witnesses, and, if notarization is required . . . well, now you really got yourself a project.

So, naturally, we would all prefer to e-sign documents.  However, the convenience may not be worth it if e-signatures are not enforceable.

Legal Analysis

The legal analysis here is actually the easy part.  The Electronic Signatures in Global and National Commerce Action (ESIGN) has been in place at the federal level for over 20 years.  The same is true for the Uniform Electronic Transactions Act (UETA), which has been adopted at the state level by all but two States.  Simply put, the legislation says:

A record or signature may not be denied legal effect or enforceability solely because it is in electronic form.

So, from a legal point of view, an electronic signature has exactly the same validity as a handwritten signature.

Practical Application

Here, the analysis gets a bit more interesting.  After all, the goal is to bind people to the rights and obligations in the agreements they sign.  What we really care about is enforceability.

Is it easier for someone to weasel out of a contract with e-signing than it would be with a handwritten signature?  The answer to that question turns on how easily the person can say: “Hey, that’s not my signature.”

In the end, what a judge wants to know is whether or not the parties intended to be bound by the agreement.  Assume for a moment some people might be willing to lie in order to get out of a contract.  Shocking, I know, but it could happen.  So, now, you have to prove that the person actually meant to sign the contract.  How can you do that?

The traditional method of having witnesses and/or notarization is a pretty iron-clad way of proving that someone voluntarily signed a document.  These methods of “acknowledgement” are still very good evidence nowadays, but they are not as undeniable as they once were.

The reason is that, with software available today, it is not particularly difficult to take a picture of someone’s actual signature and affix it to another document. 

Someone looking to commit fraud could use PDF and/or JPEG manipulation software to fake signatures of both the signer and the witnesses.  The same is true for notarization.  All one would really need is a picture of the notary’s stamp.  With that, and maybe a little old-fashioned forgery, a fraudster could put together a document that appears to have been signed, witnessed and notarized.

So, the traditional methods are still good, but they are no longer airtight.  In fact, they never have been (e.g. Catch Me If You Can).  If someone wants to fake a document, they can.

If signatures can be faked, then the person you are trying to hold to a contract can say: “That does look like my signature, but I didn’t sign the contract.”  So, now what do you do?

Modern Solution

Since there is no way to ever know with 100% certainty that a signature is authentic — even with witnesses and notarization — should we not take advantage of the convenience we get through e-signing?

On top of the convenience, in some important ways, e-signatures can be even more secure than handwritten signatures. 

For one thing, the e-sign apps generate a Certificate of Authenticity showing when and where the electronic signature was affixed.  That is certainly not proof positive, but it might be just about as good as notarization.

Now, I know what you are thinking.

E-sign apps depend solely upon email addresses, so it might be very easy for a person to get out of a contract by just saying “Someone hacked my email” or “Another person who has access to my email account signed, but I didn’t authorize that.”

Best Evidence

That brings us to the crux of this article.  What if, in addition to the other party’s e-signature, you also have an email thread showing discussions leading up to execution of the document?  How is the other party going to wriggle out of that evidence?

Even if you only have a single confirmation email saying something like “I received the document you e-signed earlier today,” any judge would find that to be very compelling evidence.

As long as the other side does not respond to your email with something like: “What are talking about?  I didn’t sign anything,” then those written communications are likely to be very hard to overcome.  In most cases, you will have a fairly extensive thread of communications, both before and after electronic execution, so you should be in very good shape if you later have to enforce the contract.

Conclusion

So, when you get down to the actual purpose of a signature, which is to demonstrate a person willingly entered into an agreement, today’s e-signing apps are not only amazingly convenient and environment-friendly, but they also tend to authenticate signatures more effectively than the traditional methods.

Of course, there are many agencies that have not caught up with the times.  For example, we still have to submit immigration documents, loan documents, and others with wet ink originals.  But, it is clear e-signing technology is the future, and we are all be better off for it.

     ~ Jeff Harrington, Esq.

One of the great things about doing business in the US is how quick, easy and inexpensive it is to form a company.  Florida is no exception.  And, as one of the States that has good weather and no income tax, Florida has become a target destination for entrepreneurs, both domestic and foreign.

Register with the State Department

As with all States, the Florida Department of State requires business entities of all types to be registered with its Corporations Division.  The process can be done online through the Department of State’s website.  The process can also be done by mailing in paper forms, but that takes much longer.

The information you will need to provide depends a bit on what form you want your company to take — i.e. limited liability company (LLC), corporation (Inc.), limited partnership (LP), etc.  However, there are some basics that apply to all forms:

Company name

You may find it a little more difficult than expected to select a company name.  As Solomon said: “There is nothing new under the sun.”  The name you give your company cannot be “confusingly similar” to that of an existing company.  So, you will need to be rather creative with your name choice, and have a couple of  alternates ready to go.

You should first do a Clearance Search to see if there is another active company with the same or similar name as the one you want to use.  To do that, you can use the “Search Records” tab at the top of the State Department’s website.

If you skip this step, you may very well go through the entire process only to have your registration rejected . . . and then have to start over.

Registered Agent

Every business entity must have a registered agent with a physical address in Florida.  The registered agent’s job is to receive official correspondences, such as lawsuits and communications from governmental entities.  (You probably will not use your registered agent for regular mail.)  You may act as your own registered agent, which will save on the expense of paying a professional agent.  That is not necessarily recommendable, though.  The cost of a professional registered agent is very low, and they generally keep an eye on things such as the annual deadline to renew your company, etc., in addition to being responsible for receiving official/legal documents.

You Florida company is permitted have an out-of-state office and mailing address.  Likewise, the owners/officers may provide out-of-state addresses as well.  However, the company must have an in-state registered agent with a physical address.

Owners & Officers

The owners may be listed in the company’s registration, but it not required.  Depending upon the nature of the business, and any confidentiality concerns, you can decide whether it makes sense to name the owners in the registration or not.  For example, if it is an owner-operated company, you may want to list the owner because doing so will make it easier to open bank accounts, etc.  But, if it is a company with employees, there may not be any good reason to expose the owner’s name in the public record.  (Click here for tips on limiting liability)

At a minimum, though, you will have to list a manager or director.  You have to give the State the name of the person or entity with authority to take decisions for the company.

That said, neither owners nor officers have to be human beings.  You could name another company or trust as the owner and/or officer.  That is a technique sometimes used for asset protection and/or flexibility.  Be aware, though, that ultimately a person has to sign on behalf of the entity that is acting as owner/officer, so somebody’s name will have to appear in the registration.

Governing Documents

In the US, the two most fundamental documents of a business are generically called the “Articles” and the “Bylaws.”

Articles

If you register your business in Florida, the State Department will automatically generate Articles based on the information you provide through the registration process.  After all, the Articles are simply the most basic information about the company.  Your company’s Articles will be available for download on the Department of State’s website.

Do not be confused by the title “Articles of Incorporation” versus “Articles of Organization.”  The difference is merely due to the form of the company.  Only corporations can “incorporate.”  So, if you create an LLC, for example, your document will be called “Articles of Organization.”  It’s the same thing, though.

Bylaws

Similarly, the actual title of this document will vary depending upon the form of your company:

• Operating Agreement
• Shareholder Agreement
• Corporation Charter
• Partnership Agreement

These are just different names for document that contains the details of your company’s governing rules.  This document is not generated automatically by the State Department, nor does it appear on the State Department’s website.

The bylaws will generally be prepared by an attorney.  Because bylaws are not required by the State Department, so business owners do not bother with them.  This, however, is a terrible idea.

If the company has partners or investors, then operating without bylaws is like jumping out of a plane without a parachute.  And, as a more immediate matter, all banks I know of require a copy of the bylaws in order to open a company bank account.

Taxpayer ID

This is not the place to get into taxation issues, such as whether the company will be “pass through,” taxed as a partnership, S-corp, C-corp, etc.  That is a discussion to be had with your tax attorney or accountant.  Moreover, there is no need to make those decisions at this point in the process.  First, just get the company registered with the State Department.

Once that is done, you will need to apply for an Employer Identification Number (EIN).  In many cases, that can also be done online here.

If nobody associated with the company has a Social Security Number or ITIN, then the application for an EIN cannot be done online.  That is a bit unfortunate because applying by fax or mail can take much longer.

From a legal point of view, there is no urgency to get the EIN.  As long as the company has a taxpayer number by the time it is ready to file a tax return, you will be fine.  However, most companies need a bank account sooner rather than later.  And, all banks I have seen require an EIN in order to open a business account.

Local Business License

Rather annoyingly, most cities and counties in Florida use alternate terms for describing a business or occupational license.  Some municipalities in our area use the term “Tax Receipt.”  Just the same, if you call or go to the website, you can get the information you need by asking for a “business license.”  Everyone knows what you mean.  It is a small fee you will need to pay the local municipality(s) where your business is located.

Do be aware that you will probably need to pay a separate fee to both the city and the county where your business has its address.

Miscellaneous

With just the items listed above, you will have the basics in place to start a business in Florida.  Obviously, if your particular business requires licenses or permits, those are separate matters you will need to address in order to legally operate your business.

There are some strategic decisions to be made along the way, which are more difficult to address in a generic article.  That is why you should always consult an attorney along the way.  You will find additional information here describing some of the key considerations.

~ Jeff Harrington, Esq.