What to Know About Choosing an Authorized Signer on a Business Account
As your business expands, daily financial transactions may take up more of your time. One solution could be to add an employee as an authorized signer on a business account. This setup can be convenient, provided you have a plan to help minimize the potential risks.
What an authorized signer does
By adding an authorized signer to your business's bank account, you're granting them access. Depending on how you set up the agreement, they might have permission to:
- Check the balance
- Sign checks on behalf of the account
- Pay bills and transfer funds to other accounts
- Make ATM deposits and withdrawals
- Stop payment on checks
- Shut down the account
As the owner, you can decide whom you'd like to make an authorized signer on a bank account. Some good options could include your business partners, your bookkeeper, your company accountant, someone in accounts payable or another employee working in a financial role. Anyone who regularly deals with money coming in or out of your business might make sense as an authorized signer.
Advantages and risks
The main advantage of adding an authorized signer is convenience. If you're the only person with signatory power for the account, that would mean you personally would need to approve checks, payments, deposits and withdrawals. As your business scales, this could lead to spending too much time on these transactions instead of more important management work.
Without an authorized signer on the account, there may be payment delays. For example, if you're out of the office and can't approve a check, a bill or vendor payment might not be paid in time. By adding another signer, you free up your time and avoid missing payment deadlines. Finally, having an extra authorized signer on a business account can ensure someone else will help keep your finances in order.
Protecting your account
An authorized signer on a checking account has access to your funds. In the wrong hands, this could pose a financial risk. For example, they may take money for themselves or pay unauthorized invoices. If they spend or withdraw inappropriately, you could press charges and take legal action. Still, there's no guarantee you'd get the money back.
To protect your checking account, the bank may allow you to set up limits and restrictions. For example, you could set it up so that any check over a certain amount, such as $1,000, must have two signatures—yours and the authorized signer. You could also ask the bank to block certain transactions, like the authorized signer having the ability to close your account.
Besides working with your bank, you could set up company systems to help track your money and prevent wrongdoing. For example, if you have one employee in charge of paying invoices and another who balances the books each month, they'd help keep each other accountable. Above all, the key is to give this signer responsibility to an employee you can count on so you lower the risk of potential issues.
Adding or removing an authorized signer
If you'd like to add an authorized signer to your bank account, contact your bank and ask them the process for doing so. At some banks, you'll need to schedule an in-person meeting, while others could let you handle the paperwork remotely.
The new authorized signer will need to present their ID, address, Social Security number and other relevant contact information to the bank. Once the bank processes everything, they'll add the new signer to the account and give them a debit card, provided you want the signer to have one.
Later, if you decide to remove an authorized signer, you can do so as the account owner. Once again, you need to notify the bank, and they should take care of it. The authorized signer doesn't need to give permission to be removed—you keep that power as the account owner.
If you're trying to decide whether adding an authorized signer makes sense for your business, ask yourself if you're frustrated with how much time you're spending on daily financial work. If the answer is yes, it could be time to hand this work off to someone else. Having an authorized signer on your bank account will take some planning and some trust, but if you find the right person for the job, it can make a world of difference.
Financial insights for your business
This information is provided for educational purposes only and should not be relied on or interpreted as accounting, financial planning, investment, legal or tax advice. First Citizens Bank (or its affiliates) neither endorses nor guarantees this information, and encourages you to consult a professional for advice applicable to your specific situation.