New business - banking question

[ryan_hunter]

Background: I am forming an s-corp with myself and 1 partner. Realistically, this is "my" business and he is more of a sleeping partner than an equal partner. I chose s-corp at the recommendation of my CPA as he said it would work better for tax reasons, and that if I only had myself in it then liability could still fall onto my personal assets as it would just be a one-person company and wouldn't provide as much protection.

I am asking this question here as my accountant is currently on vacation and is taking awhile to get back to me. I realize I could just go down to the bank and ask them, but sometimes bankers give you less-than-accurate information and I've received good replies on this forum in the past so I wanted to come here first.

I want to create the bank account such that only I can access/spend/withdraw/wire the funds. I do not want my company's co-owner to be able to access them. It's not that I don't trust him, but for all intents and purposes this is "my" business so I just want to protect it as much as possible. So my question is this: is it possible to create a company bank account such that only I can spend/withdraw the money, or will any of the company's owners be able to get into it anyway?

I realize we could probably draw up a contract where he agrees not to touch the money, but at the same time it would obviously be much better to just lock him out of it from the start in order to avoid any potential issues. Is this possible?

 

[LdiJ]

Background: I am forming an s-corp with myself and 1 partner. Realistically, this is "my" business and he is more of a sleeping partner than an equal partner. I chose s-corp at the recommendation of my CPA as he said it would work better for tax reasons, and that if I only had myself in it then liability could still fall onto my personal assets as it would just be a one-person company and wouldn't provide as much protection.

I am asking this question here as my accountant is currently on vacation and is taking awhile to get back to me. I realize I could just go down to the bank and ask them, but sometimes bankers give you less-than-accurate information and I've received good replies on this forum in the past so I wanted to come here first.

I want to create the bank account such that only I can access/spend/withdraw/wire the funds. I do not want my company's co-owner to be able to access them. It's not that I don't trust him, but for all intents and purposes this is "my" business so I just want to protect it as much as possible. So my question is this: is it possible to create a company bank account such that only I can spend/withdraw the money, or will any of the company's owners be able to get into it anyway?

I realize we could probably draw up a contract where he agrees not to touch the money, but at the same time it would obviously be much better to just lock him out of it from the start in order to avoid any potential issues. Is this possible?

It is absolutely possible to set up a corporate bank account with only one signer.

 

[tranquility]

The signatory on a business account does not even have to be the owner. Sure, you can do it. You can also get a lot of protection from physical security of the checks themselves.

 

[ryan_hunter]

Thanks, that's exactly what I wanted to know. So if I am the only signatory, and he were to walk in there and show them proof that he owned the business, they would still not let him touch the account?

 

[LdiJ]

Thanks, that's exactly what I wanted to know. So if I am the only signatory, and he were to walk in there and show them proof that he owned the business, they would still not let him touch the account?

No, they would not unless there was some other kind of documentation that he provided to them to show that you no longer had any connection to the business. For example, if he could provide documentation that you had sold or relinquished your partnership, or had a court order removing you from the partnership then they could give him access.

 

[ryan_hunter]

No, they would not unless there was some other kind of documentation that he provided to them to show that you no longer had any connection to the business. For example, if he could provide documentation that you had sold or relinquished your partnership, or had a court order removing you from the partnership then they could give him access.

I am never going to do either of those things, so the only possibility of that happening is if we have a falling out in the future and he attempts to defraud me and drain the account for himself. Just assuming a worst case scenario in which he has nothing to lose and presents the bank with fraudulent paperwork showing evidence of the examples you mentioned, what type of process would the bank follow? Would they just have a manager look at it, say "ok this looks legitimate," and then give him full access to everything? Or is it an extremely lengthy process where they would contact me multiple times to inform me of what's going on before doing anything?

 

[LdiJ]

I am never going to do either of those things, so the only possibility of that happening is if we have a falling out in the future and he attempts to defraud me and drain the account for himself. Just assuming a worst case scenario in which he has nothing to lose and presents the bank with fraudulent paperwork showing evidence of the examples you mentioned, what type of process would the bank follow? Would they just have a manager look at it, say "ok this looks legitimate," and then give him full access to everything? Or is it an extremely lengthy process where they would contact me multiple times to inform me of what's going on before doing anything?

If you are this paranoid about the bank account then you need to be re-thinking having this person being a shareholder in the S-corp. Just buy decent liability insurance instead.