Problem: You need to prove to a bank (or another) that you own your business
Imagine you walk into a bank to open a new checking account for your business. The banker says you must provide proof that you own the business. You hand the banker the articles, bylaws, member control agreement, or other documents prepared when forming your business. Then the banker says, “I don’t see you listed as the owner.” What do you do?
Solution: Educate your banker or find a new banker
In short, many business bankers don’t know what to look for in legal documents. If they don’t see someone listed as the “owner,” they claim you don’t have the right documents. However, legal documents often use other terms to indicate the owner of a business. The company’s owner is typically clear from designations on the documents such as “shareholder” (in a corporation) or “member” (in an LLC).
Background: Legal documents use various terms for “owner”
Shortly after business owners form a new LLC or corporation, they seek to open a bank account for the business. Usually, this is a smooth process.
Unfortunately, some business owners have encountered problems when opening a bank account for their new business. Some bankers take a look at the business documents and think some additional document is required. As background, these are standard formation documents for small businesses:
Standard documents for a corporation (S corp or C corp)
- Articles of Incorporation
- Bylaws
- Written Action of Incorporator
- Other “written actions” or “meeting minutes”
- Agreements between the shareholders
Standard documents for an LLC
- Articles of Organization
- Bylaws, Member Control Agreement, Operating Agreement, or a similar document
- Written Action of Organizer
- Other “written actions” or “meeting minutes”
What does an “organizer” do?
A new business owner explained a similar problem recently:
I ran into a problem when trying to open a business bank account. The banker said the “organizer” who filed the Articles of Organization must sign the bank account documents. The “organizer” was my attorney, and she won’t sign for my bank account. Can you help?
The banker failed to understand legal terms for “owner.”
Some bankers think the “organizer” is the owner, when in fact, that simply is not true. “Organizer” is simply a term for whoever is filing the articles (to start the business) with the government. For example, if an LLC is formed by an attorney, the attorney will sign as the “organizer” of the LLC.
“Organizer” is the person who files the documents. The Written Action (this is the title of the document) will be signed by whoever filed the documents, which is not necessarily the owner.
Summary
The owner is indicated using terms like
- Shareholder (in a corporation)
- Member (in an LLC)
Officers also have authority to open bank accounts for the business. The officers are indicated using terms like
- Officer (in a corporation) or Manager (in an LLC)
- President (in a corporation or LLC), CEO (in a corporation or LLC), or Chief Manager (in an LLC)
- Treasurer (in a corporation or LLC)
- Secretary (in a corporation or LLC)
Look in the documents for these terms to show you own and/or control the company.
If you still cannot get resolution, ask for a bank manager, who most likely is more knowledgeable than the banker you worked with and will understand how this works.
Tip: Find a local business bank
When selecting a bank for your startup business, search for a business bank where the bankers (1) are knowledgeable about business and (2) have other resources that can help you as you grow. This is usually a small bank, not one of the big banks (Wells Fargo, TCF, US Bank, etc.) that caters to consumers.
For transactions and deals more complex than opening a bank account, you may need to provide other proof of ownership. This might include an official tax document (EIN or tax returns) or secretary’s certificate (written authorization from the company, signed and often notarized by the secretary of a company).
