I run a small LLC here in Texas. I went to open a business checking account at a local bank and they asked for my company agreement. I've had an account at a big national bank before and they never asked for that. Is this normal now? I have my formation certificate from the Secretary of State but the company agreement was something I downloaded and filled out myself. Do they really need it?
Banking
Why did my Texas bank ask for a company agreement?
My bank asked for ours too. It's an internal document but they use it to confirm who has authority to sign and open accounts. Not Just the formation certificate.
Confirming authority is the main thing. Texas doesn't require you to file your company agreement with the state, so the bank can't pull it from a public record. They have to qsk you.
And the certificate of formation just says the LLC exists. It doesn't say who can bind it to a contract.
That makes sense. I was worried they were asking for something that shouldn't exist. I think mine might have a generic management section. Does it matter if it's a fill-in-the-blank template?
The bank doesn't care if it's a template. They just want to see the language about management and who can act for the company.
What if you don't have one at all?
If you don't have one, some banks will accept a signed statement or resolution instead. But most want something in writing because after the 2017 Texas LLC Act, the company agreement can override default rules in the statute. That makes it more important for them to see it.
We had a similar request in Houston. They also asked for an operating agreement for our partnership. Seems to be standard for new accounts now.
Part of it is also the bank's KYC requirements. They want to know who the owners and managers are. The company agreement usually lays that out more clearly than the formation filing.
Thanks. I'll bring my copy in. I wasn't trying to hide anything, just surprised. I always thought the company agreement was private.
It is private, but you're giving it to your bank, not filing it with the state. They keep it in their records.
This is weird to me. I opened a business accouunt in another state and only needed the formation certificate and an EIN letter.
Different banks and different states have different practices. Banks in Texas may be more cautious. Plus a company agreement can change the default management structure, which affects who can sign.
Also, if the bank lets someone open an account who didnt have authority, they can be on the hook. So they ask for the document that shows authority.
Makes me wonder if I should just have one even if I'm a single-member LLC. I never bothered.
Probably good practice. You never know when a bank or lender will ask.