Chapter 13 – Finances
Steps to Open an Association Bank Account
Over the course of time, every neighborhood association accumulates money. The association needs a system in place for dealing with these funds. What kind of bank account should be opened and how should you go about opening an account for an organization?
Step One: Obtain a Tax Identification Number
A tax identification number is a federal tax number that is filed with the Internal Revenue Service. The number enables the bank to report the earnings of the association’s account to the IRS for tax filing purposes. You can get an ID number from the IRS.
If you don’t have a tax ID number, or feel that it is not necessary, you can open an account with a member’s personal Social Security number. Often the Neighborhood Association Secretary will use his/her number. The person whose number is being used is liable for paying taxes in the interest income reported by the bank to the IRS. This means that the money in the account is considered the personal money of the ID holder and taxes must be paid as if it is additional income. Also, if there is ever a lien against the person’s assets, those monies are considered personal property and can be assessed. We recommend you do not take this course of action, and obtain a tax identification number.
Step Two: Obtain Information on Fees and Charges
Research the fees and charges assessed at different banks and credit unions. Some have better programs then others. Banks may waive service charges to organizations that provide public service. Others waive service charges for clubs and group organizations. It is a simple matter to call and ask before you open an account.
Step Three: Obtain Important Documentation
If you are a nonprofit corporation, you must bring a copy of the Articles of Incorporation stamped “Filed” by your state’s Corporation Commission. For Minnesota, this is the Secretary of State. If you are not a corporation, some banks may require a copy of your bylaws or minutes of your first meeting. You must also state the names and titles of people who are authorized to conduct business for the organizations (write checks).
Step Four: Obtain Signature Cards
The secretary of your Neighborhood Association along with anyone else who will be signing on the account must sign signature authorization cards. You will also need a Director’s signature in many cases (an officer of the corporation or a designated Director).
Tip
Run your Neighborhoods Association like a business. Open a bank account.
Types of Accounts
Checking: Any accounts open to individual customers are open to neighborhood associations. The least expensive usually have minimum deposit requirements.
Savings: If you make limited withdrawals, you might be better off with a savings account rather then a checking account.