Is Notarization Required for Operating Agreements?

What are Operating Agreements?

At its most basic, an operating agreement is a document that spells out how a company will operate. More specifically, the agreement will describe how a company will be run internally among its owners and provide a framework for external business operation.
Often found in limited liability companies (LLCs), these agreements act as a companion to the company’s articles of organization . An operating agreement not only lays down rules for how business will be handled internally and with the outside world, but helps to protect the entity from being subject to general partnerships laws, which can lead to some unintended tax consequences.
In addition, the operating agreement may also cover such items as how partner compensation will be determined, rules about transfer of partnership interests, rules on admission or withdrawal of an owner and actions that require unanimous approval.

Requirements of The Law: Notarization Defined

In practical terms, a notary public is a person legally empowered to act as a witness to the signing of documents. All states have laws that govern how notaries operate. These laws require, for example, that notaries verify the identity of the person signing a document, keep records of their work and sign a notary log. The main purpose of notarization is to deter fraud, by verifying the identity of a party to a document.
When a notary’s log is reviewed, it should be supported by a notarization on the document that is admissible in court. Notarization is not a rubber stamp, but a legal declaration made by a disinterested third party. That is to say, the notary must be independent, with no interest in the subject matter of the notarized document.
In the context of an operating agreement, notarization is generally not a requirement, and simply being notarized does not necessarily make a document binding. Courts do not generally invalidate a contract just because it isn’t notarized. On the other hand, certain documents and circumstances do require notarization. For example, notarization is a requirement for a valid last will and testament, reversible transfers of real property, and at least 12 other types of documents bearing various statutory requirements. As a general rule, when required, notarization is not optional.
It is always prudent to properly identify the need for notarization when planning legal documents. For example, RI General Laws §7-16-73 affords shareholders and partners a right to inspect the books of a corporation or partnership, which may include financial information, a list of shareholders or partners, etc. To exercise this right, an interested party must submit a request in writing, signed by a notary public. In this instance, the notarization does not render the entire document effective, but the notarization is necessary for the entirety of the purported right to be enforceable.

State Requirements for Notarizing Operating Agreements

Each state has the authority to determine its own laws regarding the requirement of notarization of legal documents, including operating agreements. Therefore, it is important to have a firm understanding of both state and local laws. Sometimes, there are specific requirements about the execution of the operating agreement when "form" LLCs are filled out online. For example, in New York State, an operating agreement is required under New York Limited Liability Company Law § 417 to be in writing but does not need to be notarized unless otherwise specified in the operating agreement. In New York State, the operating agreement may be amended or adopted by a written agreement signed by the members. This includes authorization signatures of the members to indicate the agreement without a witness, marriage license, or notarization signatures. In most cases, however, the execution of the operating agreement will need to be on file with the Secretary of State. Simply put, some states do not require notarization and some do, so it is vital that you understand the laws in your Country.

Why Notarize an Operating Agreement?

Many people choose to notarize an operating agreement even when it is not required, and for good reason. A notarized agreement may support a case in court if the company is ever involved in a lawsuit. Generally, a notarized agreement is better than one that is not. While having a notarized agreement does not mean the company will automatically win any lawsuit it’s involved in, a notarized agreement is objectively better evidence than a non-notarized one. The fact that a third-party verifier (the notary) confirmed the identities of the signers may lend credibility to the signatures on the document.
When a judge sees that a business document is signed in front of a notary, he or she may be more willing to accept as true that the signatures are authentic. If no notary was present when the agreement was signed, the judge may be less willing to accept the signatures as authentic. Notarized documents can also help with resolving disputes about when an agreement was signed. If a partner tries to claim that an agreement was signed at a later date than the day on which it was notarized, the notary’s signature may be useful to debunk that argument.

How to Notarize Your Operating Agreement

Before signing, ask yourself:

Who’s going to be responsible? Consider having each manager or member sign the operating agreement individually.
What’s the legal relationship? Which members are the "managers" and which are not? Who has what responsibility?
Are there any conflicts of interest? Does anyone want that position, such as being a manager in two companies?
Are there any shares in your business that are subject to vesting or other restrictions?
Do you intend to have the option to buy out any of the other members of this limited liability company or corporation?

Once you have answered these questions, decide whether or not you want each member to have their individual operating agreement signed/notarized.
To notarize, check with:

Your bank: Inquire whether a notary would charge. Oftentimes, it is a free service offered to customers.
Your insurance provider: Ask if a notary is available to notarize documents for you.
Your attorney: Find out if your attorney will notarize documents for a fee.
Your friends and family: Are any of your friends or their spouses notaries?

If none of these options are available to you, and you find it necessary to notarize the operating agreement , there are for-profit notaries available. Look in the phone book under "Notary Public."
Be sure to call before you go and ensure there will be someone available to notarize your agreement.
Necessary documentation:

Both parties must be present when signing the document.
Have valid identification. The notary has discretion to accept various forms of ID; however, a government-issued photo ID (e.g., a U.S. passport, armed forces identification card, or enhanced driver’s license) is preferred.
Confirm that the document is complete and free of blank lines.

The National Notary Association also posts information about notary services on its website. Be sure to check out your state’s page for information regarding state-specific requirements.
For a list of all Notary Provisions, visit the National Notary Association. Each state may vary on its requirements.
Common notarization procedures:

Ensure the notary public is present when the agreement is signed.
Confirm that you both have proper ID (see Necessary Documentation section).
Sign the agreement in front of the notary.
Ensure the notary completes the limit of liability statement and affixes his/her seal/stamp.

Mistakes and Confusion regarding Notarization

As a preparer of operating agreements, I commonly hear questions along the lines of "do I have to send the Operating Agreement to get notarized?" There is no same day "notarization service" offered for Operating Agreements at Legal Incorporation because notarization is unnecessary.
Many people believe that notarization validates a signature. That is not true. They further believe that notarization is a legal requirement. This is also, not true.
A notary public’s job is to help identify the person signing the document. When you go to get a document notarized, you present a valid government issued photo ID to the notary public, showing your photo, your name, and your address. The notary public keeps a log book of every time he or she notarizes and takes a thumb print of the signer’s right hand.
All the notary public is doing is making sure that they are notarizing the signature of the correct person. It doesn’t matter if the signature on the document exactly matches the photo on the ID – notaries are also taught that signatures can look different – what matters is that the person in front of them is who they say they are.
A notarized signature can still be fraudulent; the notary public has no way of knowing if the signer was signing as an agent or a member of a single member LLC, or an officer or a director of a corporation. Notaries are not required to investigate who the signers are. Therefore, the purpose of notarization is only to validate the identity of the person signing the document.
There’s no benefit to notarization for a legal document such as an Operating Agreement. All it does is prove that the person who appears in front of the notary public is the same person whose name appears on the document. This is usually not necessary because most people only perform transactions with other "known" people – such as family members and business partners. The notary public doesn’t ask you a series of suitability questions like "is this an arm’s length transaction?" They are simply verifying that you are who you say you are, not giving you permission to enter into an agreement.
The business law attorneys at Zenith Legal incorporate every business in accordance with the law and the particular needs of our clients. We help you understand the details of Operating Agreements and why it’s important that you and your fellow members understand the agreement you’ve signed, regardless of whether it was signed in front of a notary public or not.

The Bottom Line regarding Notarization

In summary, there is no general requirement for business agreements or legal documents to be notarized. Even default state law will not always require notarization. In some contexts, entailing the liquidation or acquisition of a business, many business agreements will require notarization. However, unless required by state statute, a contract does not legally require notarization.
If notarization is not a statutory requirement, many business parties will prefer to notarize agreements, but not all. Financial and legal professionals are more likely to require notarization than other business professionals . Notaries can be found on almost any college campus, in law offices, real estate offices, banks, and even in some government offices.
Unless required by state statute, notarized signatures are not required on an operating agreement. However, many business professionals will consider notarization as extra protection in the event of a dispute. We always recommend that business clients consult with an attorney licensed to practice in their state for the most accurate business law advice regarding notary requirements.