Proper Way to Endorse a Business Check

As a business owner, you may have the task of processing and depositing checks made out in the name of the business. It is easy to learn the proper way to endorse a business check. It is similar to how you endorse a check made out to you, but it's important to do it correctly. Otherwise the bank will not--and legally should not--process the check.

How Business Checks Work

A business is a separate legal entity distinct from any individual person, even the owner of a sole proprietorship. When a customer makes out a check to the business he uses the business's legal name or a registered "Doing Business Name," also called a fictitious business name. Consequently, when you endorse a business check, you are acting on behalf of another legal entity (the business) with a different name and not for yourself. The form a business check endorsement takes reflects this legal status.

Types of Endorsement

The basic way to endorse a business check is the blank endorsement. Turn the check over. On the reverse side you'll see an instruction like "Sign below this line" or he equivalent. Write the full legal name, or DBA name, of the business and sign your own name below. You must be a person within the company who is authorized to endorse the check. If the business name is written incorrectly by the customer, write the name as it appears on the front of the check, then the correct name, followed by your signature.
Most of the time, business checks are deposited rather than cashed. To insure an endorsed check cannot be cashed, use a restricted endorsement. All you need to do is add "For Deposit Only" or "Deposit to Account (number) below your signature. If you are sending checks to the bank or dropping them into a night depository, this is always the safest method to use. You can also sign a business check over to a third party. To do this, write "Pay to the order of" (name) on the back of the check, followed by the business name and then your signature.
If your business receives a large number of checks, you may want to consider switching to an endorsement stamp. The use of a stamp relieves you of the need to write out each endorsement which can save a good deal of time. Before you order an endorsement stamp check with your bank and follow their requirements for having an endorsement stamp made. For safety's sake, only have endorsement stamps that use the restricted, "for deposit only," method in case the stamp is lost or stolen.

References

• Endorse a Check
• Endorsing Business Checks