What Is a 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.

There are different constraints co-owners might be bound by depending on the ownership structure, such as the case with real estate—which could operate as joint tenants or tenants in common.

Understanding Co-Owners

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.

Key Takeaways

  • Co-owners can be a group or individuals that own a percentage of an asset in conjunction with another individual or group.
  • The revenue, tax, legal, and financial obligations can be different for each co-owner.
  • There are risks to co-ownership, which can include shared responsibility for the other party’s reckless or negligent actions.

Criticism of Co-Owners

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 an 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 strategic about who is named, they run an enormous risk that the assets will not be distributed as desired upon passing.