Statement of Authority Definition
A statement of authority definition is an optional declaration of the owners and partners responsible for a business.3 min read
A statement of authority definition is an optional declaration of the owners and partners responsible for a business. It is also often called a statement of partnership authority. This document clearly states who the decision-makers are and who has the authority to carry out plans and sign documents. It also lays down who has the authority to make decisions that could affect other business partners.
Many businesses make statements of authority for legal reasons. It's highly recommended that anyone starting a partnership enters into a statement of authority, even if it is never filed. Statements of authority are extremely valuable because they create clear guidelines as to who takes responsibility for the business. In certain states, a statement of authority only needs to be filed if it is for an out-of-state business.
Information Contained in a Statement of Authority
A statement of authority can include lots of information, such as:
- The name of the business.
- The names of the business partners.
- Areas in which a particular partner's authority is limited or ways his or her authority differs from that of other partners.
- At least two partners' signatures to certify the document.
In Colorado, statements of authority are governed by a specific section of the Revised Statutes (2015). Under this legislation, a trust is allowed to convey, acquire, lease, or encumber property in that trust's name. In cases like this, a statement of authority related to the conveyancing of interest in that property must be recorded. Someone authorized to hold the title deed on the trust's behalf must execute the statement of authority. Under these circumstances, this includes the trustees.
The statement of authority not only states the name and type of the trust and identifies who is authorized to make property decisions on the trust's behalf, but also specifies:
- The state, country, or authority it was formed under.
- The mailing address to which tax statements must be sent.
Also known as a partnership, a general partnership is a business that has two partners who are the business's co-owners. These partners will pay tax on the business's income as individuals. A simple verbal agreement between the partners can lead to the formation of a general partnership.
Benefits of General Partnerships
There are many benefits to this type of business, including that individuals, and not the business, pay income tax. There is less paperwork involved in starting a partnership than in starting a corporation.
Disadvantages of General Partnerships
The main disadvantage of partnerships is that the partners as individuals must take responsibility for the business's liability. Another factor to think about is that arguments can easily take place between partners about matters such as paybacks, investments, and important business-related decisions.
Filing a Statement of Authority
Companies must file a statement of authority in the state in which they operate. You can find these documents online, print them out, and file them with the secretary of state. You simply need to fill them in and mail them off to be filed. The standard filing fee is at least $70. While most states don't require general partnerships to file these statements, you will need to make sure of this. You can determine your case's specific requirements by calling the state department.
Any limitations that exist in terms of the ways a trustee can bind the entity can also be specified in a statement of authority. If there are no such limitations in this agreement, then no limitations exist. The statement can also stipulate the ways in which the entity handles its interests in real property.
After the relevant trustees sign a statement of authority, it must receive the seal of a notary public before being recorded in the county where the subject's real property is located. It must include the real property's commonly known address, as well as a legal description that distinguishes the property.
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