How to Sign Over a Business Check to Someone Else

Endorsing a business check allows for the transfer of funds to another party. This process involves specific steps and considerations to ensure the transaction is valid and secure. Understanding how to sign over a business check to someone else can prevent delays and complications. This guide clarifies the procedures for transferring a business check.

Understanding Business Check Endorsement

Endorsement on a check signifies the transfer of its ownership from the payee to another person or entity. This action essentially converts a check into a negotiable instrument.

For a business check, the authority to endorse rests with an authorized representative of the business. This includes the business owner, treasurer, secretary, accountant, or any individual specifically assigned this power. The individual must have signatory authority on the business account and their signature should match the bank’s records. The Uniform Commercial Code (UCC), adopted by individual states, governs check transactions, including endorsements. The payee’s name on the front of the check must accurately match the business entity, as this helps ensure a smooth endorsement process.

Steps to Endorse a Business Check

Physically endorsing a business check involves specific actions on the back. The endorsement area is typically located on the back, often marked with lines and an “x” indicating where to sign. To endorse a business check to another party, it requires a “special endorsement.”

The authorized individual from the business should first write “Pay to the Order of [New Payee Name]” in the endorsement area. Directly below this, the business name as it appears on the payee line of the check should be written. Following the business name, the authorized individual must sign their name and include their company title, such as “Owner” or “Treasurer.” This specific wording and signature sequence legally transfers the check’s ownership. Using blue or black ink is advisable, and all writing should be legible to prevent any issues during processing.

Recipient’s Role and Bank Processing

Once a business check has been properly endorsed to a new payee, that recipient must then deposit or cash it. The new payee must endorse the check by signing their name on the back, typically below the original business’s endorsement. Some banks may require the new payee’s signature to be accompanied by “For Deposit Only” and their account number for added security.

Banks process third-party endorsed checks, but policies can vary between financial institutions. It is common for banks to require identification from both the original payee and the new recipient, especially for larger amounts, due to increased fraud risks. Funds availability for such transactions can vary; while some funds might be available the next business day, a full release of funds may take up to two business days or longer if a hold is placed.

Specific Considerations for Business Endorsements

When a check is made out to a business with multiple payees, such as “Business A AND Business B,” both entities need to endorse the check. If the check states “Business A OR Business B,” then either entity can endorse it.

Applying a “For Deposit Only” restriction ensures the check can only be deposited into an account, rather than cashed. If the payee name on the check has a slight discrepancy from the registered business name, the business may endorse it as it appears on the check, then sign the correct business name underneath. It is always recommended to verify with your bank regarding their policy on such discrepancies. If the check is for a business, the recipient should ideally have a business account themselves.