Comingling Personal and Business Funds BY JEFF THOMPSON, CRCM & KATIE FERRELL, CRCM, CAMS, UNITED BANKERS’ BANK When business customers comingle funds between personal and business accounts, it can create challenges both for the bank and the customer. This article highlights scenarios that should be avoided and how to educate business owners on potential negative implications. SCENARIO 1: CASHING A CHECK WRITTEN TO A BUSINESS John Doe brings in a check written to his single member LLC, JD Associates, and wants the bank to cash the check and issue proceeds directly to him. Regardless of the size of the check, this method of conducting the transaction should be avoided because while Mr. Doe is the sole owner of that business, he is not the payee. John should deposit the check into the appropriately styled account and issue a check made payable to himself off the business account, or if necessary, negotiate a cash withdrawal after the item is safely deposited and any appropriate hold period has elapsed. Failure to handle the transaction in this manner creates risks because the item no longer includes the appropriate chain of custody to meet the requirements of Section 3-302 of the Uniform Commercial Code — Holder in Due Course. More importantly, if the check was written to pay for a product or service of JD Associates LLC and there is an issue or dispute with the product or service at a later time, Mr. Doe’s corporate veil that he created when he formed the LLC could be compromised, and his personal assets could be at risk if the situation results in a legal disagreement. 12 | CURRENCY
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