Authorized Signers on Business Bank Accounts
Authorized signers on business bank accounts are people who are legally permitted to spend or commit monies from that account.3 min read
Updated July 9, 2020:
Authorized signers on business bank accounts are people who are legally permitted to spend or commit monies from that account. Limited liability companies are always legally separate from their owners. Therefore, in terms of a business bank account, the owner is stated as the limited liability company.
Authorized Signer for Checking Account
Normally, persons authorized to withdraw or deposit money and sign checks do not have to receive permission from the owner. All transactions completed by an authorized signer will be made for you as the account owner. However, authorized signers do not have rights to any financial assets unless they are listed as beneficiaries in the event of the account owner's death.
An authorized signer should never write checks for the account if they are aware that funds are unavailable. However, unless there is a contract that states otherwise, that individual would not be responsible for any fees that would result from an overdraft.
In the event that an authorized signer uses company funds for anything that does not benefit the owner, than a personal lawsuit may be warranted. That individual may be taken to court in order to reclaim the money. Remember that as an owner you are still legally responsible for any charges or fees incurred by any authorized signers.
It is not the bank's responsibility to monitor the purpose of withdrawals from any authorized signer. This is because an authorized signer has the same access to the business bank account as the company owner. According to the Uniform Commercial Code, an authorized signer has certain rights to a business account, including:
- The ability to sign checks
- Access to an account's balance
- The right to view transactions
- The ability to stop payments on checks
- The option to close the account
The only way to avoid any conflict is to have the accessibility rights of a business account clearly documented in writing.
When adding an individual to a company account, it is necessary to take the person to the bank that is affiliated with the business. At this time, the authorized signer must complete an application and sign any necessary contracts. Each person will need to provide photo identification and their Social Security card. Some companies may choose to use an online bank for their financial institution. Be sure to follow the appropriate measures to add an authorized signer to an online account.
Procedures to revoke the rights of an authorized signer vary among banks. In most cases, the financial institution will require the notification to be documented in writing. It is up to the owner to destroy any debit cards or checks associated with the account. Until the bank officially makes the changes, the owner is responsible for any charges. This process may take up to 24 hours to complete.
Second Authorized Signer on an LLC Business Bank Account
Authorized signers on business bank accounts are able to legally perform transactions on behalf of limited liability companies (LLCs). The LLC retains ownership of the bank account.
To clarify, the LLC has all of the rights and responsibilities associated with the entity's bank account, but an authorized signer is allowed to do business in the same way as the owner. However, an authorized signer does not have the same legal responsibilities as an owner. This means that a highly trusted individual should be the second authorized signer on an LLC business bank account. By law, an authorized signer is permitted to make financial transactions from the account such as spending or committing company funds.
Signature authority can be granted by an LLC to one or more individuals for all legal and financial documents or permission can be authorized for only specific accounts or transactions. Additionally, sometimes different positions have the authority to sign off on specific paperwork. For example, a managing member or LLC president may be the authorized signer for the following records:
- Loan documents
- Partnership agreements
Whereas, the chief director of the LLC may have the authority to sign off on other documents, such as:
- Any other finance-related paperwork
If you need help with authorized signers on business bank accounts, you can post your legal need on UpCounsel's marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies like Google, Menlo Ventures, and Airbnb.