We have received a request to open a checking account which would have two businesses as joint owners. One business is a subsidiary of the other. One individual would be named as an authorized signer for both businesses.

I can't imagine why anyone would want to do this from an accounting/audit standpoint, however, my question is whether there would be any regulatory concerns with doing this. What about account titling?

Here's a link to a guru post where John and I critiqued the idea. That question dealt with a sole proprietorship with multiple DBA's, not two different entities. In my opinion, your fact situation is even less desirable.

Like you, I think it would be an accounting nightmare for the customer unless they had software that segregated the transactions. However, from the bank's perspective, I do not want the job of explaining to tellers when it is and is not permissible to deposit checks payable to different payees into a single account. I also think the customer is asking for your assistance in subverting your fee schedule.

Thanks Ken, for confirming what I was thinking!

Hang on a second...the two businesses could be opening this account for a joint job they're working on together. Their in house software could deal with the accounting issue, the account would opened with both names because they might receive payment in one or both of the names and need the vehicle to deposit the funds particular to this job.

Sounds funky? Happens with construction programs on occasion and drilling work. Sometimes the entities aren't related at all, sometimes they're subsidiaries. Most all have strong enough in house accounting to deal with the paperwork but open the account specifically to account for the jobs money. Don't assume all your clients are little mom and pops just doing goofy things

As to the two names...I don't see the issue. If you have a joint account for John Doe and Mary Jane Doetta, the tellers have two names to view when taking deposits. In this case it's just two business names verses two individual consumers.

And if it is a joint venture as Dawnie supposes, here's a link with some suggestions.

Thank you Ken The words Joint and Venture just weren't coming to my little head today It's Sunday you know Glad to know your brain is stronger than mine today. Joint job was close though That's the typical description my significant other uses when they start planning one of these little "ventures"

I always get a little dander up when we start to question businesses. Sometimes we forget that the larger a business becomes, the more complicated the account structures get. Many banks leave this stuff up the their senior commercial folks, who see them daily and don't question them, but if the same client popped into the local branch to open the account red lights would flash and buzzers would start buzzing.

Sometimes the account structures that are on first glance "odd" really aren't at all, and of course, sometimes they're just plain goofy, in which case the folks involved just need our educated minds to help them out with what they really need.

When I read this question I immediately thought of the joint ventures (ok well "jobs" because I'm tired). Sure they're all for pretty darned big companies, but they're not funky or risky to the bank, they're just a more sophisticated way of doing business.

I see your point regarding joint ventures, but that isn't the case with this account. This would be a permanent and ongoing relationship. It is a situation where we are obtaining the account from another (very large) bank and we are being told "THEY did it this way". That always makes me nervous when I hear that.

There are`a lot of If's here but IMO there is nothing wrong with this, as long as you have obtained proper documentation that both entities have mutual authorized signers. If both are corporations or one is and one isn't documentation is required on both just as if they were single accounts.

You can certainly refuse to accept the account. But making a decision based on fact instead of speculation,may be the approach to take. In a friendly way, you might enquire of the customer why they do it this way. The information you obtain may assist in making a decision you will be comfortable with in going forward with a long term relationship at your bank.

I'm in agreement with Don (mostly because I like his name)

I don't condone adjusting policy based on another bank's policy, but this type of relationship isn't unusual, especially as companies get larger and larger. Their internal accounting systems are probably already set up to operate under this type of system (since you've mentioned they've had it at another bank). Some JV's go on for years and years, some are very temporary in nature (ie that construction example). Term won't specificy the value of the JV It's going to be alive as long as the companies are doing business together.

I don't see a problem with the account, and if you can accomodate the client, you might have an opportunity at stealing a great client from a large bank If it's too small to fuss with, I guess you could pass, but at least now you have more to think about before you do so