Business Accounts in a Partnership
If you choose to start up a business on your own as a sole proprietor or single owner, you ultimately make all of the important decisions. But if you choose to partner with another individual the process of making decisions is a joint effort. One important detail of getting the business partnership up and running is to establish business accounts.
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Partnership Types
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Business owners have four different choices for establishing a partnership. A general partnership is the standard type, where two or more people (general partners) come together to start a business with a decided ownership split (such as 60-40 or 50-50). They share equal responsibility for the business and decision making rights. A limited partnership is when one or more of the partners acts as a "silent" or limited partner with limited risk and decision making abilities. A limited liability partnership is a general partnership where the members don't have personal liability for actions of other partners (and in some cases business obligations). A limited liability limited partnership is basically a limited partnership that absolves partners from personal liabilities related to the actions of other business partners.
Business Name
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When you establish a partnership you need to use a fictitious or assumed name in the course of business. A fictitious name is the company name other than the first and last name of each owner. So instead of John Smith and Joe Smith, a fictitious name might be Smith Brothers Company. In order to establish a business account for a partnership the owners must file for an official fictitious name with the secretary of state's office or the similar local bureau that handles business affairs.
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Name on the Account
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In addition to the fictitious name, the bank may also require all of the partners to be present to open and sign for the business account. In other cases the bank might allow one partner to establish the account or at the very minimum the general partners of the business. Depending on the partnership type and the bank's policies the account signers (individual partners) may be held personally liable for problems related to the business account.
Partnership Agreement
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When a group of partners comes together to establish a business account, the bank commonly requests official paperwork from the state proving the status of the company. Besides registration certificates and any required business licenses, the bank must also see the partnership agreement. A partnership agreement outlines all details of the business, including how it will manage financial accounts. The bank also requires partners to submit any deposit, borrowing and signature authorizations related to the account.
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