n opening a business account, like most things in life, the convenient option is not always the best option. Particularly if you are considering a joint account with one or more partners, it is important to understand the risks and be aware of different options.
What is a joint bank account?
A joint bank account allows each partner on the account to make deposits, withdrawals, and other transactions.
What are the benefits?
This is a convenient option that allows partners to manage finances through a centralized account. Anyone on the account has equal ownership rights and does not have to wait for consent to complete a transaction. Joint access also allows for transparency and oversight. Each partner on the account is insured up to $250,000 which means more total coverage.
What are the pitfalls?
With convenience comes risk of abuse. Partners on the account can each make deposits, withdrawals, and transfer funds. If a partner withdraws all funds or engages in other unauthorized transactions, the only recourse is legal action. If a partner is having financial issues or involved in a divorce or lawsuit, creditors may be able to pursue funds in the account regardless where they originated. More account owners also means more chances for a security breach.
What are other options?
An option that offers convenience with more protection is a joint account that links partner accounts. Also, a tenants-in-common joint account adds more protection by requiring multiple signors on transactions. These are just a few to consider.
Please contact us if you would like help in determining what type of account may work best for your business needs.