How To Endorse a Check to Your Business, You want to make it as simple as you can for clients to pay you as a business owner. While many people might like cash or credit cards, some people might favor checks.
This is good news for you because checks are frequently less expensive to receive payments from due to the fees associated with processing credit card payments. As well as the potential for credit card chargebacks. However, the procedure for endorsing checks for your business differs slightly from that for endorsing checks for individuals.
Find out what information you need to supply. When endorsing a check payable to your company.
How To Endorse Business Checks
Go to the endorsement space on the check’s back to sign your name there. It states “Endorse Here” in a small portion at the top. Complete the endorsement by using a pen as follows:
- Writing the business name, which should match the payee on the front of the check
- Signing your name
- Writing your title (President, Owner, Treasurer, etc.)
- Adding any restrictions to the check that you require
You can also use a stamp to endorse your checks. If you accept a lot of checks (say, more than a handful every day). You may quickly complete endorsements by ordering a stamp with all the necessary information from online check printers and office supply outlets.
On the back of the check, your full endorsement should fit in the space above the line (although there is some wiggle room). The following are a few obstacles that prevent everything from fitting in this space:
- An especially long business name
- The need for multiple signatures
- Any restrictions you add
Restricting the Endorsement
When you sign your name on a check, you give the owner permission to cash it. Since your bank will collect the money. And deposit it into your account, this typically doesn’t result in issues.
However, if a check is stolen or lost after being endorsed. The criminal might cash it or reroute the deposit to another account.
By restricting what happens to the funds after you endorse the check, a restricted endorsement lowers your risk. You could, for instance, stop the check from being cashed so that a paper trail always exists to demonstrate where the money goes.
The phrase “For deposit exclusively to account #XXX” is the most typical restriction (using your account number). Accordingly, the check needs to be deposited in the account you specify and cannot be cashed.
Cashing a Check Paid to Your Business
The majority of the checks made payable to your firm will certainly need to be deposited because banks are frequently reluctant to cash them.
Cashing checks made out to a business is doable but difficult. This is due to the fact that cashing a check constitutes a cash withdrawal.
Businesses may have numerous owners and any withdrawals. Or expenditure of funds must be authorized by a number of these individuals. If they are unsure if the individual holding the check has permission to use the funds, banks are frequently hesitant to cash company checks.
Once your account has been used regularly for a while, your best option. If you do need to cash a company check is to go to your own bank (where you hold your business checking account).
Acting Like a Business
It’s a good idea to insist that clients make cheques payable to your company rather than to you. This assists you in limiting your personal liability in the event that something bad happens to the business, in addition to proving that you are a legitimate enterprise.
Using Personal Accounts
You might be tempted to ask clients to make checks payable to you. But dealing with business checks comes with additional costs and inconvenience (as an individual). Even putting company checks in your personal account might tempt you.
However, unless you sign the check over, which is also unlikely to be accepted, banks aren’t allowed to deposit such corporate checks into your personal account. Even if you are the only owner and employee, this is true.
If the bank becomes aware that you are attempting to deposit a check paid to a business into your personal account, you risk delays getting paid and other complications.
Personal Liability
Using a business checking account for your business income reduces your personal liability even if you can deposit business checks into your personal account.
Utilizing your personal account compromises your personal assets and, for tax purposes, blurs the distinction between your personal and professional lives. To maintain a clear separation between your personal and work lives, look for a cheap business checking account.
Other Ways To Get Paid
There are alternative payment methods you can utilize if checks are too onerous for your company to use:
Cash: This is the most affordable choice if the price is your main concern. However. It could lead to issues with logistics, operations, and security.
Plastic: Credit and debit cards are popular payment methods for consumers. But they can be expensive for businesses due to transaction costs. Observe the regulations governing the addition of fees to credit card purchases.
Electronic payments: Consider taking money directly out of consumers’ bank accounts for more cheap payment processing. ACH transactions frequently cost less than card transactions.
Fintech payments: Companies facilitating online payments like PayPal, Square, Stripe, Amazon Pay, Apple Pay, Google Pay, and others are available to use by businesses. Generally speaking, these platforms provide quick, seamless transactions with dependable security measures and more affordable costs than credit card processing.
Frequently Asked Questions (FAQs)
Do I sign my name or the business name on a business check?
The name that you enter or sign in the “Pay to the order of” field on the front of a check matches the name on the endorsement line on the back. You would sign your company’s name on the endorsement line because these checks would be given to your business as payment.
Can I endorse a business check to a personal account?
