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As a member of an LLC, you want to make receiving funds from clients as easy and painless as possible. The only problem is that no one really taught you how to endorse your LLC checks. No worries, that’s why we made this in-depth article on LLC checks.
We are going to simply and easily walk you through the method of endorsing a check from your business and what you need to include. Everything related to checks and your LLC is here.
How to Endorse a Check From Your LLC
You might have been told to endorse your business check the moment you received it. Before we get into the understanding of endorsing, we’d like to go over a safety tip.
You should endorse your business check a moment before you hand the check to the banker. It is important to wait as long as possible before you endorse the check or checks for your LLC.
A check is legal money. If you lose a business check that you endorsed there is a possibility that it can fall into the wrong hands and get stolen.
In this situation, there is a big risk of forgery and theft. So please, follow that step and simply wait.
How and Where to Endorse Your LLC Checks: There is a small space on the back of a check where you endorse the check. Usually, there is a line that reads “ENDORSES CHECK HERE.” On the X, sign your name in the available space.
Match Names: The name on the payee line should match the name signed on the back of the check. Therefore if your business is written in the payee line, then that’s the name that you must sign in when you endorse your LLC checks.
Signing a restrictive endorsement is a great way to ensure that your money goes into a specific bank account. You just need to include the following on the backside of the check:
For deposit only to account number XXXXXXXX.
Sign your name below or above. Be sure to fit it all in above the line.
Writing out exactly what you want it is one of the safest ways to endorse a check. In a bad situation, if your check is stolen, it will be much more difficult for a criminal to alter the endorsement.
A blank endorsement is made by simply signing your business name ( or personal name, depends on the name written in the payee line) in the proper margins on the back of the check. Signing a blank endorsement is actually the most common and least secure way to cash or deposit a check.
Then tell the banker if you’d like to deposit the money or take the cash with you. Remember, be sure to endorse the check at the bank, not days before.
Endorse to a Third Party
If you’d like to pay a supplier, and all you have is a check signed to you, no worries! You can endorse a check and write it over to someones else. Make sure to include:
Pay to the order of (third party).
Sign your name below or above. Be sure to fit it all in above the line.
This isn’t the most ideal way to pay someone, but the option is out there for you. We have come across a few banks that don’t accept this practice due to the potential fraud risk.
Check with banks involved before you endorse to a third party.
Who Signs to Endorse Business Checks
To keep it simple, the LLC administrators should endorse business-related checks (those names should be written in the company’s operating agreement).
Do I Always have to Endorse My LLC Checks?
Truth be told, some banks will accept a check without an endorsement. We found that the banks that accept checks without an endorsement do so at a limited amount.
Usually, the bank will then ask for an identification card to be sure that you are the person/business representor on the payee line. It’s important to verify with your bank before you decide not to endorse a check written to you.
What Does it Mean to Endorse a Business Check?
Getting paid with a check, it just like someone handing you some cash. There are just a couple more steps involved.
The easiest way to turn a check into cash is to pass it to the bank. When you endorse a check, you allow the bank to collect your payment. You basically give the bank the right to act on your behalf.
Note: Just be sure to involve your LLC accountant to ensure that he or she is on top of your business’s finances.
To set things straight, endorsing an LLC check is a part of a security step that verifies you as the recipient of the check and authorizes the bank to complete the transaction for you.
With that said, if you want to get in and out of the bank, endorse your business check properly. Now that you know how to endorse a check, start collecting!
Parts of a Check: Labeled & Explained
Now that you have a clear understanding of how to endorse your LLC checks, let’s take it one step further.
In this section, we are going to dive into the parts of a check that you need to be familiar with.
Although designs differ from check to check, most checks have the same setup.
After reading this through, you will understand how to deal with a business check when passed to your LLC.
In each highlighted number above, you’ll find a short explanation in our quick guide. Continue reading for the full explanation.
Personal information: About the account owner/s.
Payee line: Person or company receiving the check.
Numeric amount box: The check amount, in numeric form.
Written amount: The check amount, in word form.
Memo line: Purpose of the check.
Date line: Date of the check.
Signature line: Signature of the account owner.
Bank contact information: Sometimes bank logo, address or phone number.
Banks routing number: How the bank is identified in the banking system.
Personal account number: Account number of the owner/s.
Check number: Appears in 2 places, helps the account owner/s track checks.
Bank fractional number/ABA: Additional identification for the banking system.
Understanding the parts of your check will make sure they come out correctly, avoid silly mistake and help you out when you order new checks.
Usually, the upper left-hand corner is where the personal information of the owner/s of the account is located. If there are 2 names it’s probably a husband and a wife. If it is a business, then the name will probably end with the following:
The personal information section is very important and is given the first row (first and last name). Below the name is the home or business address.
2– Payee Line
This is where you write the name, company or organization that you wish to pay. The person or establishment that you are writing the check for is called a Payee.
It is important that you specify who the payee is and do so correctly. Only the payee can cash, deposit or endorse the check over to someone else.
3– Numeric Amount Box
This box is where you write the numerical amount of the check. Although important, the numerical amount box isn’t the official way to determine the amount of your check.
The amount of money is interpreted from the written amount, below(4). Of course, both amounts should match up.
We recommend writing out the numeric amount as far to the left of the box. In addition to that, write out an X or a squiggle to prevent someone from altering the amount.
4– Written Amount
Underneath the payee line is where you write the written amount of money on the check. In the example above, the check is for $180.00. On the written amount line you would right One hundred eighty & 00/100 (no cents).
Writing out the amount on a check is a requirement and is very important. If you take note of our tips, it will be harder for someone to manipulate the check and can avoid fraud.
As mentioned above, the written amount section is the official amount of the check and should be taken seriously.
5– Memo Line
Quite honestly, the memo line is the least important field on a check. The memo line is the space to write a special note about the transaction. This can assist you or the payee in receiving the check.
Of course, the memo can be helpful but by no means is it a requirement to be filled out. Most people write the purpose of the payment on the memo line.
6– Date Line
Although the dateline is pretty straightforward, it is very important that you are paying attention.
You can write the current date or a future date.
Writing a future dated check is called “post-dating”. Most people post date if they are giving checks to their landlord or simply don’t want the payee to cash the check until a certain date.
There is no “right” way to write out the date: number or text form will do. We recommend that you write out the month, that way you will decrease the risk of making a mistake. If you write the wrong date, your check has the possibility of being voided.
7– Signature Line
Signing your check should be the last step when you writing out your check. Your bank will have you sign a signature card when you form an account. This is how they recognize that you wrote the check.
To prevent fraud, we recommend writing out your signature in a way that can not be easily copied (avoid scribbling).
8– Bank Contact Information
On every check, there is a small section with your bank’s name/logo. Sometimes there is a phone number or an address included as well.
If you received a check, you don’t need to go to their exact bank to cash it. The money will come out of their account at the bank in the contact information. The bank contact information informs you where they bank.
9– Bank Routing Number
Each check has a bank routing number that is found at the bottom left corner of the check. The bank routing number serves as an account address so that other banks know where your account is.
Routing numbers are printed with magnetic ink. This is a requirement presented by the Federal Reserve to enhance the efficiency of the checking process.
10– Personal Account Number
In most cases, there are 3 groups of numbers at the bottom of a check. The left group is the bank routing number, The middle group is your personal account number and the right group is the check number.
Every so often you’ll find a check with a different format. If you’re looking for the personal account number, it is always before the highlighted symbol in the picture above.
11– Check Number
The checking number is a reference number for you to keep track of the number of checks written. This will help you balance and keep track of your checkbook.
In most checks, this number appears in 2 places at the top right and bottom right corners (as you can see above).
12– Bank Fractional Number/ABA
The American Bankers Association (ABA) number is generally located in the top right corner.
This is a number that represents your bank, its location and the Federal Reserve branch that serves the bank.
Back of a Check
The back of a check is just as important as the front of the check if not more. As mentioned above, the back of a check is where you endorse (sign) the check to convert it into cash.
There are 3 general areas on the back of a check that you should be familiar with, the endorsement area, the security screen, and the security box.
Endorsement area: As mentioned before, the endorsement area is where the payee signs the check to deposit or cash out. This is as simple as signing in the designated area.
Once a check is endorsed it is essentially ready to be cashed. It is highly recommended to endorse the check moments before deposit or cashing out the check.
Security screen: The security screen area is less important for check barriers but should be acknowledged.
The security screen area is for the financial institutions and is the appointed area to note the flow of events while processing the check.
Security box: The security box is an informative area that contains a warning aimed to discourage thieves from changing anything on a check.
Now you know how to endorse your LLC checks and the small details that makeup checks.
Understanding these essential terms and practices can avoid silly mistakes, save time and steamroll your business processes.
Common Questions in Relation to Checks
Q: What part of a check do you sign?
A: The Individual that receives a check is to sign on the signature line. The signature line is located on the bottom right corner of most checks.
Q: When was the first check written?
A: The first checks started appearing in the United States in the late 1700s. Printed checks were introduced to the public in 1762 by a British banker named Lawrence Childs. Prior to 1762, checks were handwritten.
Q: Should you write out a check with a pen?
Make it a habit to always write a check with a pen and make sure that your pen is unerasable. Writing out a check in pen is the first line of defense against a thief. Someone looking to steal can easily alter the amounts or payee name on a check if written in pencil.
Q: Is it safe to buy checks online?
A: It’s definitely safe to buy checks online. Online check distributors provide high-quality check notes and must meet numerous security requirements in order to sell checks to residential customers.
Jake is the Head Data Analyst at FinancePond. He Likes numbers, correlations and is crazy about data. Jake started his career in finance as an FHA analyst at Greystone. Jake has a passion for mathematics and enjoys writing about all aspects of personal finance.