How Is a Check Endorsed Payable to a Business?

Endorsing a check is a legal liability for businesses.

According to "Intro to Business" by Les Dlabay, James Burrow and Brad Kleindl, endorsing a check is equivalent to promising that if the bank does not pay the amount listed on the check, the business will. This means that businesses should limit authority to endorse checks to those with authority to issue these funds.

Endorsing a Business Check

A check can be endorsed by the business owner or owning partner. Checks can be endorsed by a corporate officer, such as a Chief Executive Officer or Chief Financial Officer. If someone is running a business that has a "doing business as" reference, the individual can personally endorse the check with her own signature.

Verifying Endorsement Authority

Endorsement authority of a signatory can be verified by contacting the business. This can also be done by contacting the bank from which the business check is written to verify that the individual has endorsement authority.

Avoiding Fraud and Theft of Endorsed Business Checks

According to "The Business Guide" by J. L. Nichols, once the check has been endorsed by the business owner or business representative, it can be cashed by any employee or even a thief. To minimize the risk of theft, the book "Auditing for Dummies" by Marie Loughran recommends endorsing checks with both the business name and bank account number.

References

• "Legal Guide for Starting & Running a Small Business"; Fred Steingold; 2009
• "The Business Guide: An Outline of Business"; J. L. Nichols; 2005
• "Intro to Business"; Les Dlabay, James L. Burrow, Brad Kleindl; 2008
• "Auditing for Dummies"; Marie Loughran; 2010

Resources

• "Financial Services Anti-Fraud Risk and Control Workbook"; Peter Goldmann; 2010