Should You Add an Authorized Signer on Your Business Bank Account?

What an Authorized Signer Can Do

An authorized signer is a person who has access to your business bank account and can conduct transactions on behalf of the business. For example, an authorized signer may be able to take the following actions:

• Deposit checks
• Sign checks
• Withdraw cash
• Transfer money from one account to another
• Pay bills or schedule payments online
• Make changes to the account, ranging from updating the business contact information to closing the account

Adding an authorized signer doesn't change the ownership of the account. If your business is a corporation, limited liability company or similar entity, the account belongs to the business. If you're a sole proprietor, you own the account.

If you're the only person who can handle banking transactions for your business, your company may fall behind on deposits or bill payments if you're unable to handle them yourself. Having an authorized signer (or multiple authorized signers) can make your business more efficient by allowing employees to handle some of the work.

Who Can Be an Authorized Signer?

You can choose anyone you want as an authorized signer. Most business owners select someone in a financial role, such as a bookkeeper or accountant, who may or may not be an employee of your business.

When choosing an authorized signer, consider:

• What financial tasks do they need to perform? Determine what types of transactions you want the authorized signer to handle. For instance, you may want the employee in charge of your business's accounts payable to be able to pay vendors online or via check.
• How much access should they have? Banks may allow you to set limits on what the authorized signer can do. For example, they might be able to sign checks below a certain amount, with larger checks requiring your signature as well. You might give them access to your business checking account, but not your business savings account, or open multiple checking accounts and give them access to one. Check with your bank to see what options are available for setting safeguards on your authorized signer.
• What internal protections can you set up? Banks typically hold the account owner responsible for spotting fraud. For example, even if you set up a requirement that both you and your authorized signer must sign large checks, your bank account's terms and conditions likely state that the bank does not actually review check signatures. It's your responsibility to examine your account statements and report anything unusual to the bank, generally within 30 days of the statement date. You can help protect your business by creating a system of internal checks and balances, such as checking your business bank account online each week or having another trusted employee review your authorized signer's transactions.

Pros and Cons of Adding an Authorized Signer

Before adding an authorized signer to your business bank account, it's important to weigh the benefits and risks.

Pros

• Greater convenience: Business banking will be faster and easier when you aren't the only person who can access your company's bank account or sign checks.
• Allows you to delegate: Handing off some of your day-to-day banking responsibilities to others allows you to focus on more important tasks, like growing your business.
• Fewer financial delays: Having more people available to deposit payments or transfer funds helps ensure there's plenty of money in your business checking account to pay employees or vendors. It also enables your business to pay bills more efficiently, helping to avoid late payments that can negatively affect your business credit score.
• Provides emergency backup: If you're unavailable due to travel, a medical crisis or a family emergency, your authorized signer can handle financial transactions without slowing your business down.

Cons

• Potential for fraud: Whether or not you set limits on their access, adding an authorized signer to your business bank account presents risk. An unscrupulous individual could empty your business bank account or divert funds into a personal account. Depending on the situation and the terms of your bank account agreement, you may not have much recourse if this happens, so it's critical to choose someone you trust.
• Loss of control: An authorized signer can make financial decisions about your business without your permission or knowledge. Even if they're doing everything right, giving up financial control to someone else can be difficult for a business owner.
• Can cause confusion: Having multiple people involved in your business transactions could lead to confusion or errors. Good record-keeping and communication are critical to making an authorized signer relationship work.
• Still requires oversight: You'll need to monitor your business bank account to keep an eye on your authorized signer's transactions, which might feel as time-consuming as handling everything yourself.

How to Add an Authorized Signer to Your Business Bank Account

Follow these steps to open a business bank account and add an authorized signer.

1. Make an appointment at the bank. Opening a business bank account generally requires visiting the bank in person, as does adding an authorized signer to an account. Banks may allow you to have an authorized signer pre-authorized without their presence and visit the bank to be authorized later.
2. Gather the required documents. Contact the bank to confirm the specific documents required. Generally, you'll need to show:
   • Your tax identification number: Sole proprietors can use their Social Security number as a tax identification number. A corporation, partnership or any business with employees must get an Employer Identification Number (EIN), which you can obtain from the IRS website for free.
   • Your business license
   • Your assumed name certificate: Businesses that operate under a DBA ("doing business as") must file a fictitious name statement with their secretary of state. Bring a copy of your certificate.
   • Business organization documents: If your business is a legal entity such as a corporation, limited liability company or partnership, you'll need your legal entity documents, such as your corporate bylaws, articles of incorporation, operating agreement or partnership agreement.
   • Personal information: You and your authorized signers must provide government-issued photo identification such as a driver's license, state ID card or passport. You'll also need to give the bank your name, contact information and birthdate.
3. Set any restrictions on the authorized signer's access. If you'd like to limit the transactions your authorized signer can perform, find out what restrictions the bank allows you to set.
4. Complete the signature card. Both you and your authorized signers will be asked to sign a card that the bank will keep on file as a record of who is authorized to access the account.
5. Make any required deposit. If your business bank account requires an opening deposit, be prepared to write a check or authorize an electronic transfer of funds into the new account.

To add an authorized signer to an existing business bank account:

1. Make an appointment to visit the bank.
2. Provide documentation. At the appointment, the authorized signer will need to provide their government-issued photo identification and personal information.
3. Complete the signature card. Update your business's signature card with the authorized signer's signature.

The Bottom Line

Lenders consider your business credit score, and sometimes your personal credit score, when you apply for credit accounts, business loans or lines of credit. Although opening a business bank account usually doesn't involve a credit check, it's a first step in building a credit history for your business. Enlisting an authorized signer on your business checking account can help ensure your business pays its bills on time, which can help to establish a good business credit score. Check your business credit report on a regular basis as your company grows.