You might recall an earlier post, I’m talking a year or two ago, about statements of authority. They are another carryover from the Revised Uniform Partnership Act. I’m convinced these carryovers from RUPA are a plot by law professors who like to teach partnership law but feel rather silly doing so since no one forms partnerships anymore. LLCs are an outlet for their frustration.
Back to the point, by filing a statement of authority with the Iowa Secretary of State (and the county recorder if you are dealing with real estate) you can eliminate any questions regarding the authority of a person to sign a loan agreement, a note, a deed, or any other legal document. But here is the caution. A Statement of Authority does not necessarily mean that the particular transaction you are concerned about has been authorized by the LLC.
Let me give you an example. Let’s say an LLC files a statement of authority declaring that Edward Sharpe has the authority to enter into any transactions on behalf of the LLC and otherwise act for or bind the LLC, including transactions involving real estate. So long as you do not have knowledge to the contrary you are entitled to rely on this statement expressed by the LLC. Edward Sharpe would have apparent authority to act on behalf of the LLC.
But I am not sure that is good enough. Let’s say I want to buy some farmland from The Nocturnals, LLC. The basic statement of authority states that Edward Sharpe has authority to sign deeds on behalf of the LLC. It does not state whether Sharpe has authority to sign my deed. Do I really want to get bogged down on issues of apparent authority, BFPs, fraud, etc. merely because I was unwilling to go the extra step and request a certified copy of the resolution of the document authorizing the sale of the land to me and while I am at it a certified copy of the operating agreement?
Which begs the question, what good are statements of authority? They are useful for routine business transactions when the dollars involved don’t justify the extra effort and they are effective immediately upon filing unlike affidavits which cannot by relied on until three years after filing, but I would use them with care.