This article is part of a larger series on Business Banking.
A joint business bank account allows both you and your business partners to have full access to your company’s finances. All parties signed to the joint 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, with everyone having access to the company’s banking activities. A partnership with two or more co-owners is ideal for this type of account, whereas a limited liability company 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. It lets you earn 2.0% APY on all balances of $100,000 or less and has account access administration, which allows you to add authorized users to your account. Visit Bluevine’s website for more information.
How To Open a Joint Business Bank Account
When opening a business bank account, you’ll need to provide certain information to the bank. Each may require slightly different information or procedures but, generally, they’ll be the same regardless of which bank you choose.
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’s 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 the following things and put them 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 things 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’ll need similar documents to open a joint business bank account. These will likely include:
- Name and address of the business
- Business tax identification number (TIN)
- Date business was established
- Country and state business was formed 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
Step 3: Choose the Best Small Business Bank
Once you have your documents together, you’ll 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 a Joint Business Bank Account
Some financial institutions will let you apply directly through their websites, with documents uploaded electronically, whereas others will require you to stop by the branch to complete the application process. Understand what is required and complete the application. In many cases, barring any missing documents, the account should be opened the same business day you apply.
Pros & Cons of a Joint Business Bank Account
|Allows you to separate business and personal finances||Each owner has access to the funds in the account, even if it’s not their money|
|Co-owners will have equal access to the business finances||Equal liability in the case of financial mismanagement|
|Increased Federal Deposit Insurance Corporation (FDIC) coverage, with each co-owner insured up to $250,000||Dividing the assets of a shared account can be complicated 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 can also end up with 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.
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, it can be messy separating assets.
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 recorded carefully when they occur and for what purpose, there is less chance of unauthorized transactions on the account.
- Have an agreement with your partners: 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.
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.