As the world becomes more and more digitized, conducting business is advancing with technology too. One of the relatively small but important aspects of business that has become digital in recent years is signing business documents. Electronic business signatures are a way to quickly and efficiently receive, sign and send back agreements, checks, invoices, legal documents, etc.
As with any legally binding agreement being signed, there are rules and regulations associated with the use of electronic signatures too. The United States Electronic Signatures in Global and National Commerce (ESIGN) Act and the Uniform Electronic Transactions Act (UETA) lay out four major requirements for an electronic signature to be recognized as valid under U.S. law:
- Intent to sign
- Consent to do business electronically
- Association of signature with the record
- Record retention
Both laws provide that no contract, signature, or record shall be denied legal effect solely because it is in electronic form. This means a contract relating to a transaction cannot be denied legal effect just because an electronic signature or record was used in its formation, and it allows electronically executed agreements to be presented in court.
Which States Allow Electronic Business Signatures?
Forty-seven states, the District of Columbia, and the U.S. Virgin Islands have adopted the UETA with the purpose of harmonizing state laws concerning retention of paper records and the validity of electronic signatures. The states that have yet to adopt the UETA according to the Uniform Law Commission are Washington, Illinois and New York, as well as the U.S. territory of Puerto Rico.
Illinois has not adopted the UETA, but it has enacted an electronic signature law (5 ILCS 175/1-101) that favors certain types of electronic signatures as more trustworthy than others. In New York since 2000, electronic signatures are legally binding under the state’s Electronic Signatures and Records Act (ESRA). Therefore, electronic signatures are as legally binding as handwritten signatures in both locations.
Though Washington state has not adopted the UETA either, they did adopt the Washington Electronic Authentication Act to help ensure security and integrity of e-messages, and it includes wording about electronic signatures.
Electronic signing laws are important to note when running and operating your business. For example, your LLC operating agreement is a document that sets forth the guidelines of the LLC and outlines ownership and member duties. If you needed to digitally sign or amend this document, it’s critical to know whether you’re allowed to do so electronically.
If you are in a state that has not yet adopted the UETA, then you should become familiar with their specific signing rules, regulations, and other laws that mention electronic signatures and other e-business policies. For more information on specific state information for your LLC, click on the links below:
Reminder for Business Owners
As with all important documents, keep in mind that you should always:
- Protect your records
- Use a secure computer and network when signing electronic documents
- Follow record retention policies
Navigating all the laws, rules and regulations of even simple things like electronic business signatures can be confusing. But with Incfile, we make it easy to help you stay up to date on all the important aspects of operating your business. In our learning center, you can find out more about state filing times and pricing, as well as ongoing filing requirements, LLC state information, corporation state information and more.
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