For businesses organized as a partnership, a joint business bank account allows both partners to have full access to company finances. Each partner with signing authority on the account can make deposits and withdrawals, check balances, transfer money, and control account access and maintenance.
Opening a joint business bank account promotes financial transparency among business owners. A partnership with two or more co-owners is ideal for this type of account. In contrast, a limited liability company (LLC) or corporation should consider a traditional business bank account set up under the company’s name and tax information.
If you’re looking for an online business checking account for your partnership, Bluevine is an excellent choice. You can earn 2.0% annual percentage yield (APY) on qualifying balances of $250,000 or less. With account access administration, you can add authorized users to your account, making it a great choice for partnerships.
How To Open a Joint Business Bank Account
When opening a business bank account, you will need to provide specific business documents to the bank. Each may require slightly different information or procedures, but generally, they will be the same regardless of which bank you choose.
Follow these four steps to open a joint business bank account:
Step 1: Set the Rules for How the Account Will Be Managed
The process of setting rules for how the account will be managed should be included in your partnership agreement. It is a critical step before opening a joint business bank account, as anyone with access to it as a joint owner will be able to monitor and control the business’s finances.
Disagreements about managing the business finances can derail a partnership before it ever gets off the ground. Decide on the following questions and put the answers in writing in your partnership agreement before opening a joint account:
- Who will be the administrator of the account?
- Who will control the access permissions to the account?
- Who can withdraw funds from the account?
- What will happen to liquid business assets if the business is dissolved?
Deciding these upfront allows you to set business boundaries before you get started and gives you a plan on how to manage your joint account. Plus, if the business needs change later, you can always modify the agreement to change how the account is managed.
Step 2: Gather the Necessary Documents & Information
Regardless of which bank you go with, you will need similar documents to open a joint business bank account. These will likely include
- Name and address of the business
- Business tax ID number
- Date business was established
- Country, and state business was formed legally and operates legally
- Personal information for each co-owner, including Social Security numbers and dates of birth
- Partnership agreement (may have different names based on where the business was formed)
- Any business licenses, which could include trade name licensees, fictitious name certificates, and any doing-business-as (DBA) filings
Most banks will list required documents on their websites. Once you choose a bank, check out the website for any information you might need, even if you plan to open an account in a branch.
You may also need to make an appointment with a business banker to open an account in person. They will likely prepare you for your visit with a list of all the documents you need before opening an account.
Step 3: Choose the Best Small Business Bank
Once you have your documents together, you will want to choose the best small business bank that offers products and services that fit the needs of your business. If choosing an excellent business checking account is your priority, check out our list of the leading small business checking accounts.
Step 4: Apply for the Joint Business Bank Account
Some financial institutions will let you apply for an account online, with documents uploaded electronically. Others will require you to stop by a branch to complete the application process. Understand what is required and complete the application. In many cases, barring any missing documents, the account can be opened the same business day you apply.
U.S. Bank is our top-recommended small business checking account. It is one of the few accounts offered by a traditional bank that has no monthly fees. See our full review of U.S. Bank business checking for details, or head over to U.S. Bank’s website to open an account.
Pros & Cons of a Joint Business Bank Account
|Allows you to separate business and personal finances||Grants each owner access to the funds in the account, even if it’s not their money|
|Provides co-owners with equal access to the business finances||Comes with equal liability in the case of financial mismanagement|
|Comes with increased Federal Deposit Insurance Corp. (FDIC) coverage, with each co-owner insured up to $250,000||Can be complicated to divide the assets if a business closes|
A joint business bank account allows you to separate business and personal funds into a dedicated business bank account. This prevents business funds from being used for personal expenses by any of the co-owners without the others being aware. This is because all co-owners will have access to the business finances.
You also have a higher FDIC insurance limit with a joint business bank account. With two co-owners, for example, each would be insured for up to $250,000, for a total of $500,000. If that limit is not enough to cover your business finances, consider a bank that uses sweep accounts to increase your FDIC insurance. This will help protect your business from a potential bank failure.
While everyone having access to the company’s finances can be positive, it can also be a drawback. Even if one owner provided most of the seed money for the business, all co-owners would have access to it once it enters a joint account.
In addition, if one owner has debt issues, a financial institution might come after the assets of a joint business bank account to satisfy those debts. If the business dissolves without a plan in the original partnership agreement, separating assets can be messy.
How To Avoid Risks Associated With a Joint Business Bank Account
To avoid any of the potential problems that could arise with a joint business bank account, follow these tips:
- Have a clear accounting record: If transactions are carefully recorded when they occur and for what purpose, there is less chance of unauthorized transactions on the account.
- Have an agreement with your partners: As stated above, if you have a clear account management plan put into your partnership agreement, it gives everyone a clear understanding of what their role is with the company’s finances.
- Choose a bank that can provide customized terms: When choosing a bank, find one that works with partnerships and can help you navigate the challenges of a joint business bank account.
- Know your partners’ financial situation: When entering a partnership, understand each partner’s personal credit and their financial contributions to the business. If someone brings a large amount of personal debt into the partnership, you might be taking on considerable risk to the business by allowing them to access company finances.
Frequently Asked Questions (FAQs)
Once you open a joint business bank account, neither co-owner can take their name off the account. This means, not only can you not remove your name from a joint business account, but you cannot remove your partner’s name either.
If you want to remove a name from a joint business bank account, you must close the account and open a new one. You may also need to reorganize your business as a sole proprietorship or an LLC before opening the new account.
Setting up a business bank account for two people requires four steps. Organize the business to ensure that how the finances will be handled is clearly stated, both while the business operates and in the event it is dissolved. Next, gather the necessary documents to open a business bank account. Then, choose the best small business checking account for your business. Finally, apply for the joint business bank account. Once it is open, fund the account.
If you are opening a joint business bank account, the bank will require both owners to sign any documentation to open the account. If you open the account at a bank branch, you will likely both need to be present when the account is opened. If you’re opening an account online, documents will be sent to each co-owner for digital signature.
For businesses organized as an LLC, you may not need all members present when the account is opened. Still, any member with signing authority on the account will likely have to visit the branch to complete paperwork.
A joint business bank account is a great way to keep the business finances of your partnership separate from the individual personal finances of each co-owner. There are risks involved, but if you make sure every partner understands the risks at the outset and you craft a detailed financial plan in your partnership agreement, then you should be able to manage a joint account that will strengthen your business partnership.