If you’re running a sole proprietorship, then you’re won't have a problem cashing a business check because, in the eyes of the law, you and your business are one and the same entity. On the other hand, if you’re a partnership or a limited liability corporation, then you’re going to go through a more complex procedure to cash that check. Also, it might not even be possible, depending on the bank you’re dealing with.
The Issue of the Bank for Business Check Cashing
If you don’t have an account for your business, then you might find business check cashing difficult. Most banks do not allow you to deposit your check into a personal account if it’s been made out to your business. They will also severely limit your check-cashing privileges because it’s not straightforward for the bank staff to figure out if they’re dealing with a sole proprietorship, a partnership or some kind of corporation. To avoid having to go through the drama and frustration, simply open a checking account for your business
Many banks and other check-cashing locations will only allow you to deposit a handwritten check made out to your business into the business’s bank account. You'll have to check with your bank to find out more. The banks do this to prevent theft and embezzlement of funds.
Rules for Businesses That Are Not Sole Proprietorships
If you’re running a sole proprietorship, you can always cash the checks written out to your business. Note, however, that you will be the only one who can do that. If you indicate the DBA, or “Doing Business As” in your business’s bank account details, it will make it much easier for you to cash the check. If, on the other hand, your business is a partnership or corporation, then you will need signatories to the bank account, who will be the only ones able to cash the check.
What About Endorsement?
When cashing a business check, you need to endorse it by signing the back and include your title and full name. Your signature must match the one the bank has on file. You will also need identification such as a driver’s license. Some banks will even go so far as to take a fingerprint before they cash the check.
Deposit for Withdrawal
There is a chance that your bank may not allow you to cash a business check, so it might make more sense to deposit the check first. Then, you can make a business check out to "cash." It’s a long way around, but it gets the job done. Keep in mind the bank may withhold a portion of the funds until the business check clears. Once it clears, the total amount of the check is available to you.
- The wisest choice is to deposit a business check into a business account. Any funds from the business account should be paid via check and addressed to the appropriate payee. This is the best practice for a business, business owners and all employees. It discourages fraud by employees and shows that business owners are not hiding funds. Mishandling business and personal funds may be punishable by law and subject to penalties by the IRS.
- Action by the IRS could be taken with private business owners if: 1) checks from the business are deposited into the owner's private banking account; 2) personal expenses are paid with business account funds; 3) personal expenses are misclassified as business expenses; or 4) accurate records are not kept.
Nicky is a business writer with nearly two decades of hands-on and publishing experience. She's been published in several business publications, including The Employment Times and Business Idea Factory. She also studied business in college.