Money is the lifeblood of any company, and it's hard to be successful without keeping good control of how your revenues flow. Part of that process is generating enough revenue to be profitable and maintaining tight control of your costs. At an even more basic level, it means controlling who has access to the company's bank accounts and under what conditions.
TL;DR (Too Long; Didn't Read)
An account holder is the person who accepts legal responsibility for handling the account.
Account Holder in a Sole Proprietorship
If you operate as a sole proprietorship, managing your bank account is simple. You'll be the account holder, just as you would if it was your own personal account. You'll set it up in the same way, with your personal identification and Social Security number.
You'll also provide two additional business-specific pieces of information: your employee identification number from the IRS – you need that if you have employees or plan to have them – and, if applicable, the fictitious name under which you're doing business. Your name is on the account, so you're the account holder by legal definition.
Keep Them Separated
When your business consists of just you, you might be tempted to skip the whole process of setting up a separate account for the business and just use one of your personal accounts for both purposes. It's not that you can't do it or that other people don't do it, but it's a really bad idea.
Both you and your accountant will find it hard to separate your business and personal transactions, and it's going to make a lot of extra work for you at year end and at tax time. It's not sustainable if you plan to grow your business, so it's smarter to just do things the right way from the start.
Giving Someone Else Access
In most businesses, there will come a time when you're too busy to do everything yourself. At that point, you'll need to give someone else access to the bank accounts so they can handle at least routine transactions and bill payments for you. These people aren't going to be account holders as you are, but you'll delegate to them some degree of authority to bank on your behalf.
In larger companies, the people you choose might be managers or key members of your accounting team. In a small company, it might be as simple as giving your only staffer signing authority. Your bank will record their personal identification and Social Security numbers just as if they were account holders.
Account Holders in Partnerships
Setting up bank accounts in a partnership is a fairly similar process. Each partner provides personal identification as well as the company's employee identification number and its fictitious name. In this case, you'll also need to furnish a copy of the partnership agreement and the certificate of registration if it's a limited partnership.
Any partner with more than a 25 percent stake of ownership and the significant controller who takes primary responsibility for running the business must provide additional information. In some cases, such as a group of physicians jointly operating a clinic, each partner might have a separate primary account but shared access to a secondary account number for their collective operations.
Account Access in Other Business Structures
Larger, incorporated companies set up bank accounts in a similar way, with the significant controller and anyone owning a 25 percent share or greater providing the bank with additional personal information.
In these cases, the company might also furnish the bank with an operating agreement explaining who is responsible for the company's management and a document called a banking resolution explaining which people have authority to set up accounts and services with the bank and under what conditions. The bigger the company, the more likely it is that the daily banking and check writing is done by relatively low-level managers or accounting staff as opposed to the owners or senior management.
It's important to have controls over the use of your bank accounts and especially over checks and payment authority. This can be as simple as keeping the company's physical checks under lock and key and restricting the keys to a few trusted people. In larger companies this isn't practical, but you might opt to set up your accounting software so that only specific people can print checks. Another common control is to require a second authorized signature on checks above a given dollar amount, which reduces the risk of fraud or embezzlement.
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