Understanding the relationship between your corporation and the bank that holds your business accounts helps you avoid surprises that can limit access to the company's funds. Your business banking accounts are based on contractual terms that you agreed to when you opened the accounts. The bank can rely on those terms or federal and state laws to freeze your corporation's accounts under certain circumstances.

Inaccessible Business Bank Accounts

A bank can freeze your corporation's bank accounts without notice for a variety of reasons. When a bank account is frozen, you're unable to withdraw funds from the account. Checks that were written prior to the freeze won't clear and any deposits made subsequent to the freeze also will be frozen. Banks may freeze more than the actual amount in the account; doubling or tripling the amount of the freeze to take into account any future deposits and causing an account with funds in it to show a negative balance.

Corporate Independence

Corporations are independent business entities. Your personal creditors typically can't access the corporation's business accounts to satisfy a judgment against you. Ordinarily, a bank can't freeze a corporation's bank accounts because of any individual shareholder's financial distress, even if you're the sole owner of the business. However, a court can make an exception and allow your personal creditors to attach your business bank accounts if you don't maintain proper segregation of your personal and business affairs.

Reasons for Freezing Business Accounts

The bank that holds your business accounts typically can freeze them under three circumstances. The most typical scenario is as a result of action by a creditor of the business. Creditors can obtain a court judgment for money the business owes, and one of the collection options available in most states is to seize the company's bank accounts. Once the bank receives a levy notice from a state official, such as the sheriff's office, it is required by law to place a hold on the funds in the account. A much less frequent scenario requires a bank to freeze an account based on a federal or state investigation into the company's business practices. Once a bank receives a court order from an investigative agency, it must comply.

Contractual Bank Actions

Banks also have the right under an account's contractual terms to freeze it at the bank's discretion, such as when the bank suspects fraud or unauthorized access. However, state banking laws may limit the amount of time a bank can freeze the account under these circumstances. The account's terms and conditions usually will specify how long the bank can freeze your account without the backing of a court order.