Depositing a Business Check Into a Personal Bank Account
Although I work a regular full time job, I also run a few fledgling side ventures on the side. As I mentioned about a month ago, I am currently attempting to establish a trade name and open a business bank account in the business’ name to better keep track of venture earnings and assets.
However, I’m currently unable to establish a business bank account because the state agency hasn’t processed and sent me my approved trade name certificate yet. I did not file for expedited service (*snapping fingers in a darnnit motion* ) so it’s taking much longer than expected. Banks will not usually allow an individual to establish a business bank account that doesn’t contain the applicant’s name in the account title without a valid trade name or fictitious business certificate. So for now, I’m stuck without the services of a proper business bank account. However, meanwhile my side businesses have continued to generate income and now I have several business checks made out to my fictitious business name that I am unable to deposit immediately. It has been weeks and the business checks continue to sit on my desk gathering dust and looking quite lonely.
Ideally, business funds should not be co-mingled with personal funds since the Internal Revenue Service (IRS) will require the tax filer to account for his/her business income and expenses on a separate form, although both business and personal income will ultimately be treated as the tax filer’s ordinary income. However, my checks have been sitting around un-deposited for some time and I am getting to the point where I want them in bank accounts and generating interest.
So Am I Permitted to Deposit Business Checks Into My Own Personal Bank Account?
I am tempted to just go ahead and deposit my business checks into my regular checking or savings account at Citibank. I am the only owner and operator of my sole proprietor business so there wouldn’t be stakeholder problems. The pickle is whether my particular financial institution will permit the deposit or not.
Perhaps my deposit will be more willingly accepted by my bank’s ATM machine than by a live teller. There are some readers out there that have indicated that an ATM made deposit will be more readily approved by the bank than one made at the counter since ATM transactions are mostly computerized. The idea is that so long as I properly endorse the back of the check with signatures containing the business name and my own name, the bank will likely accept it as valid, particularly if the check’s numerical amount is not too significant. I’m just not certain on where the business checks go if the deposit into my personal account is denied and rejected.
There are no specific laws governing such deposits that I am aware of and it appears to be a policy decision governed and made by individual financial institutions. In general, business accounts involve higher sums of money with greater transactional frequency, thus demanding more of the financial institution’s attention. This probably explains why many banks tend to require higher maintenance fees for business accounts than personal bank accounts. Because of the higher transactional costs and blanket policy reasons, some banks simply may not be willing to allow this sort of practice and may require business check depositors to open business checking account if they want to deposit a business check made out to the business’ name.
Interestingly, online services like Google Adsense and a few others have permitted me to create direct deposit relationships with my own personal banking account, even though the checks were made payable out to my business name. I’m not sure if these were merely oversights or indicative of more flexible policies, but I wish there was more overall uniformity on the issue.
I think I may ultimately wait this out until my trade name certificate gets cleared since it should be approved in a few more weeks, but I wonder if anyone knows the answer for this question?
December 16th, 2007 at 1:06 am
How about opening a new personal account that you use just for business? I don’t know if the bank will let you convert it to a business account once you have all the documentation, but at least that way you’re not co-mingling funds.
December 16th, 2007 at 12:43 pm
That’s a good option idea. I was trying to see if I could temporarily have the funds held in a separate savings account until I received my trade name certificate from the state. But despite my explanations such as the business and my personal account having the same home address, Citibank still ultimately refused to budge. They were nice about it but also tried to discourage me from attempting to send it through the ATM deposit to game the system, saying it wouldn’t work.
I guess my only recourse now is just to wait it out until I receive the appropriate documentation. I wonder if banks other than Citibank are more liberal or flexible about temporarily depositing business checks into personal accounts?
February 6th, 2008 at 7:18 pm
I have a personal checking account. No business account. I have a check that is made out to a business and then my personal name under the business name. The business name contains my last name, also. The bank will not accept deposit of the check into my personal account. I told the payer to make the check out to me personally but they put both names on the check. I receive approximately two checks a year for audio recording services. It would be cost prohibitive to open a separate business account and pay all of the fees for these small checks. They are usually from schools. The schools can re-issue the checks but it will be approximately one year from now before they can re-issue because of the funds the checks come from. Any suggestions?
February 6th, 2008 at 7:31 pm
Al, any way the school can issue payment via direct deposit or ACH transfer? Many companies have been known to be willing to issue such electronic transfers to a personal banking account even though it’s technically made out to the company name.
But I’m actually in the same boat still. I have a business check that needs to be cashed and the issuing company is refusing to resend it via ACH transfer as I described above. I’ll probably have to find a local bank with a low business account minimum balance requirement and low fees for check cashing purposes.
July 19th, 2008 at 11:42 am
ACTUALLY!!! I work at a bank and it IS the law that you CANNOT deposit a check made to a business into a personal account. That is not the banks decision…IT IS THE LAW, and the banks can’t do anything about it. The IRS will come after the bank if they do this. Just so you know!!!
August 9th, 2008 at 6:09 pm
Sturf,
What about if you sign the check on the back with the business name and sign it over to yourself (Or what ever name is on the personal account) will that make it o.k. for the bank to put the check made out to your small business into your personal account?