Who Can Speak on Behalf of a Corporation?

Many small business owners choose to operate as corporations in order to limit the owners' liability. As a small business owner, you might choose a C Corporation status, which has more complex tax rules, or an S Corporation, in which taxes are passed directly to the shareholders. Whichever corporate status you choose, you will need to decide who can legally speak for your corporation. Sometimes the person who can speak on behalf of a corporation is stipulated by contract and sometimes by situation.

In order to legally speak on behalf of your small business, the person must be your corporation's agent. An agent owes the corporation certain duties, including loyalty to act in the corporation's best interests, obedience to the corporation's requests and reasonable care to act rationally. Keep these duties in mind when choosing your corporation's agents, and make sure the people you choose are up to the task. Your corporation should reimburse any expenses an agent incurs while representing your small business, and it should hold the agent harmless for anything he does while acting on your business's behalf.

In agency law, actual authority means that your small business specifically granted your agent his representative authority. This can be done through requests that imply that authority or by signing a contract. A simple example is when you, as the owner of a small business, ask an employee to call a retailer and order paper. In this case, you've given your employee actual authority to act on your business's behalf. If you want your agent to be able to sign contracts in your business's name, then you will need to give him these rights in the corporation's bylaws. In any corporation, officers and directors usually have automatic authority to speak on behalf of the corporation. Shareholders, however, do not.

Small businesses should be aware of the concept of apparent authority and how it can make them liable in some situations. In simple terms, apparent authority occurs when someone you did not authorize to speak for your business still does, and a third party takes an action based on what that person said. If a third party reasonably believed that person had authority, then the law of apparent authority protects the third party. Consider the scenario where, for some reason, you specifically did not give your vice president authority to speak for your small business. Yet, he still promises a job to a third party. If the third party moves to your city for this job, his belief that your VP had the right to offer him a position is reasonable. In this case, although you didn't authorize the VP to speak, you may still need to compensate the third party for expenses he incurred by believing the VP. The concept can be complicated, so you should speak with an attorney if your business encounters this issue.

Some small business owners choose to hire public relations managers so they can have someone who specifically oversees attracting more customers with public events, press releases and ad campaigns. Your PR manager can speak on your business's behalf, but he cannot legally bind your business by signing contracts. For example, if a reporter from your local newspaper calls with a question about a new product you're selling, then your PR manager has the right to answer the reporter's questions and be quoted in the newspaper article as a representative of your corporation.