Opinion needed on business banking

[sloaney]

I just set up a company and I went today to set up the checking account. My partner is contributing sweat equity for 25% of the venture while I am funding the rest with cash. The deal is I am more of the business person while he is more of the technical. Ultimately, he will be making no financial decisions now or in the future.

The concern I have is he has made the assumption and is pushing to be put on the account. I want these first stages to go as smoothly as possible. I don't necessarily want him on the account, but since I am new to business I don't know the potential risk of adding him on? Are there any? Is there any harm in putting him on the account? My gut tells me to leave him off, but if I can put him on to give him the "warm and fuzzies" and he stays focused on getting this thing off the ground I would like that.

Any experience or opinions would be appreciated.

James

[AllBusiness09]

I've been working in banking for the last few years opening and managing accounts for our personal and business account holders, so I can understand what you mean.

When you establish your account, you basically have two choices for your partner. If you add him as a joint signer with you (essentially claiming he is your 50/50 partner) he has full access to the account. The thing about banking is that this also means he can do whatever he wants with regards to wire transfers, opening other accounts, applying for loans, etc. If you absolutely trust him and know that in your absence he could help you keep the financials of the business in order, then maybe this is the right decision for you.

The other way, and my preferred way of handling any additional signers, is to complete a resolution upon opening the account. What this will do is allow you to specify exactly what powers your signers have with regards to banking. If you want him to be able to sign checks but not make direct withdrawls or transfers, you can specify that. If you want him to be able to make inquiries only about balances and activity, you can do that too. It's just an extra safety measure for you as the owner.

For example, franchises like McDondald's or Subway usually have an owner that has full access to the account. The owner then may have general managers who can come in and make deposits/transfers/withdrawls, write payroll checks, and make inquiries. Those managers then may have shift managers who can only make deposits or inquiries.

It sounds like you've already opened the account, but if you haven't make sure you ask your banker if you they have a resolution on file for you. Most of the time a resolution will print by default during the workflow of opening the account, and you may have signed one already and didn't realize it. If they don't supply one you may have to contact someone who can draw one up for you, but this might be a problem with only the smallest banks and even then it shouldn't be an issue. Make sure to also specify what type of business you own. Is it an LLC? Then you'll need an LLC Resolution. The same applies if it is a corporation, partnership, or DBA/sole proprietorship.

I hope this helps, and if you have any other questions I'll try to check back later.

[atkinson4738]

I really appreciate your thorough response. This makes a lot more sense now. I actually called my banker after reading your response and he told me the best thing to do is set him up as "view only" on the online banking with no transaction authority. I think this is the route I am going to go. Thanks again for the response.

[The Stealthy One]

Wow! Didn't know this could be done. Very helpful info, indeed. Thanks, AllBusiness09.