Electronic signatures (e-signatures) allow businesses to sign documents electronically and are considered legally binding when certain conditions are met under US federal law. Not using e-signatures compliantly can have legal and financial consequences that might affect your ability to raise funds and incorporate swiftly.

Below, we’ll discuss the US laws that regulate electronic signatures, the conditions businesses must meet for e-signatures to be valid, and other factors to consider when implementing e-signature workflows.

Key takeaways

• E-signatures are considered legally valid in the US and many other countries as long as specific conditions are met under US law.

• In the US, two pieces of legislation establish e-signatures as legally binding: the Uniform Electronic Transactions Act (UETA) and the Electronic Signatures in Global and National Commerce (ESIGN) Act.

• Implementing e-signature workflows can help business owners finalize important fundraising and corporate documents faster.

Are e-signatures legally binding?

In the US and many other countries, electronic signatures, sometimes called e-signatures, are considered legally binding. They’re typically recognized as an acceptable alternative to handwritten (or wet) signatures and enable documents to be signed digitally.

Because of the laws that regulate them, e-signatures can take different forms, including electronic sounds, symbols, or processes. When used properly, e-signatures provide business owners with a secure and legal option to sign and execute documents quickly.

What are the laws that make e-signatures enforceable?

Two laws in the US establish the legal standing of e-signatures: UETA and the ESIGN Act.

• UETA: UETA “establishes the legal equivalence of electronic records and signatures with paper writings and manually signed signatures.” Created in 1999, the act helps ensure policies on e-signatures are consistent in different US states. All states (with the exception of New York, which follows its Electronic Signatures and Records Act, or ESRA), the District of Columbia, Puerto Rico, and the US Virgin Islands have enacted UETA.

• ESIGN Act: The ESIGN Act is a US federal law that builds on UETA. The act, signed into law in 2000, “provides a general rule of validity for electronic records and signatures for transactions in or affecting interstate or foreign commerce.”

When is an e-signature considered invalid?

UETA and the ESIGN Act identify certain exceptions when e-signatures are not considered valid. For example, electronic signatures cannot be used to execute certain legally binding documents such as wills, codicils, and testamentary trusts. They are also considered invalid on official court documents, court orders, and court notices.

Using e-signatures noncompliantly on allowed document types can result in invalidation. For example, if both parties do not consent to signing a document such as a contract electronically, the executed document might not be valid.

Not using e-signatures correctly can potentially have legal and financial consequences for business owners. Important documents could be considered invalid—even after both parties sign—or need to be re-signed. This can cause delays when forming a new business or disrupt ongoing business operations.

What makes an e-signature valid?

Four general requirements must be met for an e-signature to be valid.

1. Clear intent to sign: All parties must demonstrate a clear intent to sign the document. For example, you might need to demonstrate your choice to sign a digital document by typing your name into a clearly labeled field. Not doing so would invalidate the document.

2. Consent to sign electronically: Both parties must consent to signing the document electronically. You might do this by clicking an “I agree” button that explicitly gives your consent to sign your name with an e-signature.

3. Use a clearly associated signature: E-signatures are required by US law to be “clearly associated” with a record. Examples include an electronic sound, symbol, or process.

4. Proper record retention: When using e-signatures, there must be a clear, auditable trail that shows who signed the document and when.

How can e-signatures be used in fundraising and corporate documents?

Using e-signatures can help early-stage startups efficiently manage legal documentation needed for fundraising business formation. Examples include:

Founding documents

Signing your founding documents, such as founders’ agreements and bylaws, with e-signatures can help with document version control and improve security. Having parties sign electronically also reduces the risk of important physical documents being lost or damaged.

Incorporation documents

US state agencies establish the procedures businesses must follow to incorporate in that state, and many states let you file articles of incorporation online. Using e-signatures on digital documents can save time over mailing physical copies or submitting documents in person at a filing office.

Fundraising and investor documents

E-signatures can reduce friction when executing important fundraising and investor documents such as Simple Agreements for Future Equity (SAFEs). As a result, deals might be finalized more swiftly, allowing business owners to begin operations sooner.

Operational documents

Once operations for your startup are established, you’ll likely have additional documents to process, such as employee and vendor contracts, nondisclosure agreements (NDAs), and paperwork for other legal matters. Using e-signatures can help reduce administrative tasks and improve efficiency with digital document management and less physical paperwork to store.

What should businesses look for in an e-signature workflow?

Founders need to consider several factors when establishing e-signature workflows for high-stake business documents. These include:

• Legal compliance: Is the workflow legally compliant with UETA and the ESIGN regulations? Are there alternative or additional legal requirements in your jurisdiction?

• Security features: When evaluating e-signature solutions, check for security features such as encrypted cloud storage with an audit trail that tracks document history.

• Integrations: What tools do you or your team use to manage documents and other important operational processes? Choosing e-signature solutions that can integrate with the technology your business uses could help you reduce errors and increase efficiencies.

• Customization: Every startup’s needs are different. Based on volume, storage, and routing requirements, consider how much customization is required to add signature workflows. The level of customization needed could affect your costs.

How Stripe Atlas can help

Stripe Atlas handles everything you need to legally launch your company—incorporation, Employer Identification Number (EIN), equity setup, and tax filings—so you can fundraise, open a bank account, and start accepting payments in as little as two business days, from anywhere in the world.

Join 100,000+ startups incorporated using Atlas, including startups backed by top investors like Y Combinator, a16z, and General Catalyst.

Get started in minutes with Atlas

The application takes under 10 minutes. You’ll choose your company structure, confirm your name is available, add up to four cofounders, set your equity split, and e-sign. Then, Atlas takes it from there, including notifying cofounders to sign their documents electronically.

Banking and payments before your EIN arrives

Atlas files your EIN application automatically after incorporation. You don’t have to wait. Atlas enables pre-EIN payments and banking so you can start accepting payments and making transactions right away. US founders with a Social Security number are typically eligible for expedited IRS processing.

Automatic 83(b) tax election filing

Atlas files your 83(b) election for you—US and non-US founders alike—with USPS Certified Mail and tracking to reduce personal income taxes. You’ll get a signed 83(b) election and proof of filing directly in the Stripe Dashboard, with certified mail confirmation.

World-class company legal documents

Atlas provides all the legal documents you need to start running your company—drafted by Cooley, one of the world’s leading venture capital law firms—and stores them directly in the Stripe Dashboard. These documents are designed to help you fundraise immediately and ensure your company is legally protected, covering aspects like ownership structure, equity distribution, and tax compliance.

$2,500 in Stripe credits, plus $50K+ in partner discounts

Atlas startups get $2,500 in Stripe product credits for their first year, plus $50,000+ in discounts on essential tools—Mercury, AWS, Carta, Xero, Perplexity, and more. Delaware registered agent service is also included free for your first year.

Learn more about how Atlas can help you set up your new business quickly and easily, or get started today.

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