Starting a business with a partner can be a rewarding experience. Not only do you have someone to help you manage the business, but you also have someone to share the burden (and profits) with.
However, before you can start reaping the benefits of having a partner, you need to establish some ground rules – and one of the most important is how you will handle your finances.
One option is to open a joint bank account. This can be a great way to streamline your finances and keep track of expenses, but it’s not without its risks.
In this post, we’ll walk you through everything you need to know about opening a joint bank account with your business partner.
Note: If you want to open a business bank account without your partner, try Bonsai Cash. Our online bank has no hidden fees or monthly minimum balance requirements. You'll also be able to create 'envelopes' or as many sub-accounts as you want. Try a new bank account today.
A joint bank account is a financial account that is owned by two or more people. Any of the account holders can deposit or withdraw money from the account, and all of the account holders are responsible for any debts incurred on the account.
Joint bank accounts are most commonly used by spouses or domestic partners, but they can also be used by business partners, family members, or friends.
That said, there are a few things to keep in mind before you open a joint bank account with someone. First, you need to trust the other person (or people) enough to give them access to your finances. Second, you need to be comfortable with sharing financial responsibility for the account.
And finally, you need to make sure that everyone understands the rules of the account – specifically, what happens if one person wants to withdraw money or close the account.
In most cases, you can open a business bank account without your partner. But this depends on your operating agreement and the laws in your state.
This also means that your partner can withdraw or deposit money without your knowledge or consent. So, it's important to have a clear understanding of your rights and responsibilities before you open an account.
There are a number of advantages to opening a joint bank account for your business. Apart from helping you keep your business and personal finances separate, a joint business bank account can also help you with:
If you have a business partner, chances are you’re going to have multiple streams of income and expenses. A joint bank account allows you to consolidate all of these into a single place, making it much easier to track your financial progress and make strategic decisions about where to allocate your resources. For instance, if you have a shared business credit card, you can easily track expenses and keep an eye on your budget.
When you open a joint bank account, each partner will have an equal say in how the account is managed. This can be helpful if you need to make major financial decisions together, such as taking out a loan, investing in new equipment, or other business transactions.
Having equal access to a business account can also be helpful if one partner needs to cover an unexpected expense or if you need to transfer money quickly between partners.
In the U.S., the Federal Deposit Insurance Corporation (FDIC) provides deposit insurance for most checking and savings accounts, protecting up to $250,000 per personal account. However, if you have a joint account with two people who are each insured for up to $250,000, your account will actually be insured for up to $500,000.
This can be a great way to safeguard your finances in the event that something goes wrong and your bank closes.
If you and your business partner each have a separate bank account for the business, it can be difficult to track what is happening with your business finances. This becomes an even bigger headache if one person is handling all of the finances. By having a joint account, you can each see what is happening with the money and where it is going. This level of transparency is crucial for any business partnership.
When you’re running a business, there are going to be a lot of financial decisions that need to be made. Having a partner who is equally invested in the success of the business can be a huge help when it comes to making these decisions. You’ll have someone to bounce ideas off of and who can offer a different perspective on things.
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Of course, there are also some potential downsides to opening a joint bank account with your business partner. Let’s take a look at those now.
If one partner mismanages the account or runs up a large debt, the other partners will be held responsible. This can put a strain on your relationship and may even lead to legal action.
It’s important that you trust your business partner implicitly. This is not a decision to be made lightly. If you have any doubts about your partner’s ability to manage money responsibly, it might be best to keep your finances separate and opening a separate business bank account.
If one of your partners runs up a large debt, the creditors may come after your joint account, leaving you in a difficult financial position. This is because all partners are jointly and severally liable for the debts of the business.
It’s important to note that this is not always the case, and it depends on the laws in your state. However, it is something to be aware of if you are considering opening a joint bank account with your business partner.
If you have a joint account and the business is dissolved, you will need to figure out how to divide the assets. This can be a challenge if there are multiple partners involved.
It’s important to talk to your lawyer about this before you open a joint bank account so that you understand all of the potential risks and challenges.
If you have more than one person managing the account, there is a higher chance of errors being made. This can lead to bounced checks, late fees, and other issues.
It’s important to have systems and procedures in place to minimize the chances of errors being made. You should also have a plan for how to deal with them if they do occur. For example, you might want to have one person responsible for paying the bills each month. Or, you might want to set up alerts so that you are notified if there is unusual activity in the account.
As you can see, there are both pros and cons to opening a joint bank account with your business partner. You’ll need to weigh the risks and benefits before making a decision. If you do decide to open a joint account, be sure to take the necessary precautions to protect yourself and your business.
In some cases, you don't need a business license to open a business bank account. But you will need to provide some documentation, such as your business formation documents, to the bank.
Yes, you will need your partner’s Social Security number to open a business bank account. This is because the IRS requires banks to collect this information for tax purposes.
The number of partners that can be on a joint business bank account varies from bank to bank. Typically, banks will allow up to four signers on a business checking or savings account.
Opening a bank account with most legacy banks can be a lengthy and tedious process. Not only do you have to deal with a lot of paperwork, but you also have to make visits to a physical branch. This can be a problem if you have business partners who live in different parts of the country or even in different parts of the world.
Bonsai Cash is an online bank that allows you to set up a business bank account and as many business sub-accounts without much hassle. In just a few minutes, you can set up an account that allows you to spend, save, and manage your business funds effortlessly.
Bonsai Cash is a great option for businesses with virtual partners because it offers:
Sign up for an account today.
A verbal contract (formally called an oral contract) refers to an agreement between two parties that's made —you guessed it— verbally.
Formal contracts, like those between an employee and an employer, are typically written down. However, some professional transactions take place based on verbally agreed terms.
Freelancers are a good example of this. Often, freelancers will take on projects having agreed on the terms and payment via the phone, or an email. Unfortunately, sometimes clients don't pull through on their agreements, and hardworking freelancers can find themselves out of pocket and wondering whether a legal battle is worth all the hassle.
The main differences between written and oral contracts are that the former is signed and documented, whereas the latter is solely attributed to verbal communication.
Verbal contracts are a bit of a gray area for most people unfamiliar with contract law —which is most of us, right?— due to the fact that there's no physical evidence to support the claims made by the implemented parties.
For any contract (written or verbal) to be binding, there are four major elements which need to be in place. The crucial elements of a contract are as follows:
Therefore, an oral agreement has legal validity if all of these elements are present. However, verbal contracts can be difficult to enforce in a court of law. In the next section, we take a look at how oral agreements hold up in court.
Most business professionals are wary of entering into contracts orally because they can difficult to enforce in the face of the law.
If an oral contract is brought in front of a court of law, there is increased risk of one party (or both!) lying about the initial terms of the agreement. This is problematic for the court, as there's no unbiased way to conclude the case; often, this will result in the case being disregarded. Moreover, it can be difficult to outline contract defects if it's not in writing.
That being said, there are plenty of situations where enforceable contracts do not need to be written or spoken, they're simply implied. For instance, when you buy milk from a store, you give something in exchange for something else and enter into an implied contract, in this case - money is exchanged for goods.
There are some types of contracts which must be in writing.
The Statute of Frauds is a legal statute which states that certain kinds of contracts must be executed in writing and signed by the parties involved. The Statute of Frauds has been adopted in almost all U.S states, and requires a written contract for the following purposes:
Typically, a court of law won't enforce an oral agreement in any of these circumstances under the statute. Instead, a written document is required to make the contract enforceable.
Contract law is generally doesn't favor contracts agreed upon verbally. A verbal agreement is difficult to prove, and can be used by those intent on committing fraud. For that reason, it's always best to put any agreements in writing and ensure all parties have fully understood and consented to signing.
Verbal agreements can be proven with actions in the absence of physical documentation. Any oral promise to provide the sale of goods or perform a service that you agreed to counts as a valid contract. So, when facing a court of law, what evidence can you provide to enforce a verbal agreement?
Unfortunately, without solid proof, it may be difficult to convince a court of the legality of an oral contract. Without witnesses to testify to the oral agreement taking place or other forms of evidence, oral contracts won't stand up in court. Instead, it becomes a matter of "he-said-she-said" - which legal professionals definitely don't have time for!
If you were to enter into a verbal contract, it's recommended to follow up with an email or a letter confirming the offer, the terms of the agreement , and payment conditions. The more you can document the elements of a contract, the better your chances of legally enforcing a oral contract.
Another option is to make a recording of the conversation where the agreement is verbalized. This can be used to support your claims in the absence of a written agreement. However, it's always best to gain the permission of the other involved parties before hitting record.
Fundamentally, most verbal agreements are legally valid as long as they meet all the requirements for a contract. However, if you were to go to court over one party not fulfilling the terms of the contract, proving that the interaction took place can be extremely taxing.
So, ultimately, the question is: written or verbal agreements?
Any good lawyer, contract law firm, or legal professional would advise you to make sure you formalize any professional agreement with a written agreement. Written contracts provide a secure testament to the conditions that were agreed and signed by the two parties involved. If it comes to it, a physical contract is much easier to eviden in legal circumstances.
Freelancers, in particular, should be aware of the extra security that digital contracts may provide. Many people choose to stick to executing contracts verbally because they're not sure how to write a contract, or they think writing out the contract terms is too complicated or requires expensive legal advice. However, this is no longer the case.
Today, we have a world of resources available at our fingertips. The internet is a treasure trove of invaluable information, platforms, and software that simplifies our lives. Creating, signing, and sending contracts has never been easier. What's more, you don't have to rely on a hiring a lawyer to explain all that legal jargon anymore.
There are plenty of tools available online for freelancers to use for guidance when drafting digital contracts. Tools like Bonsai provide a range of customizable, vetted contract templates for all kinds of freelance professionals. No matter what industry you're operating in, Bonsai has a professional template to offer.
A written contract makes the agreement much easier to prove the terms of the agreement in case something were to go awry. The two parties involved can rest assured that they're legal rights are protected, and the terms of the contract are sufficiently documented. Plus, it provides both parties with peace of mind to focus on the tasks at hand.
Bonsai's product suite for freelancers allows users to make contracts from scratch, or using professional templates, and sign them using an online signature maker.
With Bonsai, you can streamline and automate all of the boring back-office tasks that come with being a freelancer. From creating proposals that clients can't say no to, to sealing the deal with a professional contract - Bonsai will revolutionize the way you do business as a freelancer.
Why not secure your business today and sign up for a free trial?