Co-Owner

A co-owner is an individual or group that shares ownership in an asset with another individual or group. The co-owner of an asset owns a percentage, though the amount may vary according to the ownership agreement. The rights of each owner are typically defined in accordance with a contract or written agreement, which often includes treatment of revenue and tax obligations.

The relationship between co-owners can vary, and the financial and legal obligations depend on the benefits each party ultimately wishes to receive. For real estate, the legal concept of co-owner, in which the parties involved may operate under Joint Tenancy or Tenancy In Common, has important ramifications. Similarly, co-owners of a brokerage account or bank account are bound by strict procedures and legal constraints to operate the account and obtain benefits from the account during the time when the account is active. When it is closed, co-owners or legal representatives of the co-owners must be involved.

Sharing ownership of an asset has risks. For example, someone who decides to make another person a co-owner of a business instead of an employee may not like the way he or she is running the business. Instead of being able to separate the person from the company as an employee, the owner now must deal with buying out the problematic individual — assuming that individual is willing to sell his or her share.

For example, consider a situation where a co-owner of a bank account irresponsibly gambles away a large sum of money on casino credit. The casino, as the creditor, could come after the account, leaving the responsible party exposed to a significant loss. Careful titling of accounts is particularly important in estate planning. If someone chooses to name a co-owner to an account and is not thoughtful about who is named, he or she runs an enormous risk that the assets will not be distributed as desired upon passing.