How to Endorse a Check to a Business
Learn the correct way to endorse checks for business accounts, ensuring accurate and secure financial processing for your company.
Properly endorsing a check is a fundamental step in managing financial transactions, particularly when funds are intended for a business. Understanding the correct procedures ensures the seamless transfer of money and helps maintain accurate financial records. Specific details authorize a financial institution to process the payment correctly into a business account.
Understanding Check Endorsement
A check endorsement serves as a legal authorization to transfer the funds from the payer to the payee. Its primary purpose is to prove that the intended recipient has authorized the deposit or cashing. This act validates the check and directs the financial institution on how to handle the money. Endorsements are typically placed on the back of the check, usually within a designated area marked “Endorse Here,” which often includes lines for a signature and additional instructions.
Endorsing to a Business Account
When endorsing a check for deposit into a business account, specific information must be included on the back of the check. Write the full name of the business exactly as it appears on the “Pay to the Order Of” line. Below the business name, an authorized individual, such as an owner or accountant, must sign their name and print their title within the company. This signature verifies that the person endorsing the check has the authority to act on behalf of the business.
For enhanced security, add a restrictive endorsement such as “For Deposit Only” or “For Deposit Only to Account #[Business Account Number]” above the business name. This instruction ensures that the check can only be deposited into the specified business account and cannot be cashed or further endorsed. Using “For Deposit Only to Account #[Your Business Account Number]” provides the highest level of restriction. Always use permanent ink, such as blue or black, to prevent alterations to the endorsement.
Depositing an Endorsed Check
After endorsing a check for a business account, common deposit methods include in-person at a bank branch, often requiring a deposit slip. Automated Teller Machines (ATM) are another option, where a deposit slip may or may not be required. Mobile deposit through a banking app is increasingly popular, allowing checks to be deposited by taking clear photos of both the front and back.
For mobile deposits, some banks require additional wording, such as “For Mobile Deposit Only” or “For Mobile Deposit Only at [Bank Name],” to be written below the endorsement signature. Many checks also feature a checkbox on the back for mobile deposits, which should be marked. Regardless of the deposit method, it is a good practice to retain a record of the deposited check, such as a photo or the physical check (until funds clear), and to verify that the deposit has been credited to the business account.
Specific Endorsement Situations
Check endorsement scenarios can present unique considerations for businesses.
When a check is made out to multiple payees, required endorsements depend on the conjunction. If payees are joined by “and” (e.g., “Business Name AND John Doe”), both parties must endorse the check.
If joined by “or” (e.g., “Business Name OR John Doe”), either party can endorse it independently.
Third-party checks, where an original payee endorses a check over to a business, are often met with strict scrutiny by banks due to increased fraud risks. Many financial institutions have policies against accepting these, or they may require both the original payee and a representative of the business to be present for the deposit. It is always advisable to contact the bank beforehand to understand their specific policies on third-party endorsements.
If a check is made out to a personal name but is intended for a business (common for sole proprietorships or businesses operating under a “Doing Business As” name), the individual should endorse it with their personal signature, followed by the business name, for example, “John Doe, dba ABC Company.” This clearly links the individual to the business and helps avoid commingling of personal and business funds.
Adding “For Deposit Only” remains a crucial security measure across all these situations, limiting the check’s use to only a deposit into the intended account.