Gavin Craig in his new Twin Cities Business Litigation Blog has an excellent post on the importance of making sure the world knows you have a corporate entity. Craig is convinced that many small business owners (especially contractors) do not know how to properly operate a corporation or LLC. Craig says,
When a person incorporates their business, it takes more than just filing a form with the Secretary of State. When a business is incorporated, it can’t be a secret to those that do business with the new corporation. In other words, the new corporation needs to disclose the fact that the business (the party that is contracting with others) is incorporated on its letterhead, business cards, invoices and checks.
Craig is right on with his warning on this issue. Whether you live in Minnesota, Iowa or Timbuktu, you must make sure you disclose the fact you have a corporate entity on your letterhead, business cards, invoices, checks and especially CONTRACTS.
This is a particularly important message for franchisees. Many franchisees operate under franchise trade name but fail to disclose in contracts, letterhead, business cards, etc. the name of their actual corporate entity. One franchisee I know was personally sued for the damages related to an advertising contract because he had not disclosed to the other side that he actually operated with an LLC rather than as a sole proprietorship. He had signed the contract using only the trade name of the franchise. The other side said at trial that it didn’t know the franchisee had an LLC. So ultimately the judge sided with the advertising company. It was an expensive lesson that could have been easily avoided.