Contract signing authority: who in your business can sign what

Signing authority is not the same thing as approval

These get confused constantly in small businesses. Approval is the internal review before a contract goes out, who checked the terms and said this is fine. Signing authority is a narrower, more formal question: who is legally entitled to bind the business by putting their name on the document. A business can have five people who approve contracts day to day and only one or two who are actually authorized signatories. Most small businesses never separate these two questions on paper, which works fine until a dispute or an audit forces someone to ask, precisely, who was actually allowed to sign this.

Who has signing authority by default, legally

This depends on your business's legal structure and isn't something I can state as a blanket fact here, it's worth confirming with whoever set up your business entity or a lawyer if you're unsure. Generally, officers named in your formation documents (a corporation's listed officers, an LLC's managing members) carry inherent authority to bind the business, while anyone else signing needs that authority delegated to them explicitly, either through a formal resolution, a signed delegation document, or in practice, a written internal policy that the business treats as authoritative even if it's not filed anywhere official. The safest approach for a small business is to assume nobody outside the registered officers or owners has authority to sign anything binding until you've explicitly granted it in writing, rather than assuming authority exists by default just because someone has a senior-sounding title.

A simple signing authority policy, in plain language

A workable policy for a small business is three short paragraphs, not a legal document:

• Who has full authority: name the specific people (by name, not just title) who can sign any contract on the business's behalf without needing anyone else's sign-off. This is usually the owner and any formally registered co-owners or officers.
• Who has limited authority, and to what dollar limit: name specific people and the specific dollar value and contract type they're authorized to sign without the owner's involvement, for example "the operations manager may sign vendor agreements up to $5,000 and standard client service agreements using the approved template, with no further sign-off required." The same limits can apply to purchase order approval.
• Everything else requires the owner's signature, personally, or explicit written sign-off from the owner authorizing someone else to sign that specific document, even if that person isn't on the standing limited-authority list.

Write the actual dollar limits to match your real risk tolerance and typical deal size, there's no universal number that's correct for every business. Keep the whole policy on one page and reviewed once a year, since the right limits usually shift as your typical contract size grows.

Setting dollar limits that actually mean something

A limit that's set too high defeats the purpose, letting someone bind the business to risk well beyond what you'd want approved without your direct involvement. A limit set too low creates the same bottleneck problem a missing approval workflow creates: everything routes to the owner regardless of how routine it is. A reasonable starting point for a small business is setting the limited-authority threshold around your typical month's recurring revenue from one client, or your typical vendor contract size, whichever is relevant, and adjusting from there based on how often you're comfortable with that person acting without you. This overlaps closely with contract approval thresholds, and for many small businesses the approval limit and the signing authority limit end up being the same number. They don't have to be, a business can require two people's approval on a $10,000 contract while still only letting one of them actually sign it, but keeping them aligned is simpler to manage and explain.

It also helps to separate the dollar limit itself from the question of contract type, since the two don't always move together. A $4,000 standard service agreement using your own template, with terms you've used fifty times before, carries genuinely less risk than a $4,000 custom agreement with a counterparty's own paper and language nobody on your side has reviewed closely. Some businesses handle this by setting a lower limit specifically for anything on a counterparty's own contract template rather than your own, since that's usually where unfamiliar, higher-risk clauses sneak in, regardless of the dollar figure attached.

A worked example: a two-owner business with one manager

Picture a business with two co-owners, both named officers on the formation documents, and one general manager who isn't an owner. A workable policy: both owners can sign anything without restriction. The general manager can sign standard vendor agreements up to $4,000 using an approved template with no changes, and standard client service agreements of any value as long as they use the approved template unchanged. Anything outside those two conditions, a custom clause, a lease, a vendor contract over $4,000, a one-off deal that doesn't fit the template, requires one of the two owners to sign personally, or to send the manager explicit written authorization for that specific document before they sign it. Notice this policy doesn't require the manager to get permission for everything, only for the things that actually carry meaningful risk or deviate from the known-safe template. That's the balance a good signing authority policy is aiming for: real freedom inside a clearly fenced area, not a leash on every signature. Letting an admin send documents shows how to give staff access without full visibility.

Records worth keeping once this policy exists

A written policy only helps if it's backed by a record of who actually signed what. Keep, at minimum, a log (even a simple spreadsheet) of every contract above your limited-authority threshold, who signed it, and under what authority, cross-referenced against your policy document itself. If you ever delegate temporary signing authority, for example while the owner is traveling, write that delegation down with a start and end date, rather than leaving it as a verbal "go ahead and sign while I'm out." These records matter most exactly when you'd least want to be reconstructing them from memory: during a dispute, a sale of the business, or a bank or insurer's due diligence review. I'd also log delegated authority the same way I'd log any other contract: dated, named, and stored where your usual signed-documents folder already lives, rather than as a separate system only one person remembers exists. My naming and filing guide covers a folder structure this fits into directly.

How I'd approach this

The businesses I see run into real trouble here are almost never the ones with a clear, if simple, written policy. They're the ones where authority was never defined, someone with an impressive title signed something assuming they could, and it later turned out the business, or the other party, disputed whether that signature actually bound anyone. Writing this down costs an afternoon and prevents a genuinely expensive conversation later. Where I'd get more directly involved is if your business has grown past needing a plain policy document, multiple entities, formal board approval requirements, or signing authority that needs to connect automatically to your approval workflow and e-signature tool so an unauthorized person literally can't initiate a signature request above their limit. That's a real system to build. Most small businesses just need the policy written down and actually followed. If I had to pick the one habit that prevents the most trouble here, it's not the dollar limit itself, it's the discipline of writing down every exception the moment it happens, "the manager signed this one specific $8,000 vendor deal with my written okay," rather than letting exceptions quietly become the new unwritten norm. A policy that's never updated to reflect how the business actually operates stops being a real policy and becomes a document nobody quite trusts, which defeats the purpose of writing it down in the first place.