Why doesn't my bank want my money?
December 1, 2008 6:42 PM   Subscribe

I operate as a sole proprietorship in the State of Texas and use my personal name as the name of my business with "Consulting" tacked on the end of it as per state rules. My bank has recently stopped accepting checks made out to anything but my real name because of "The Patriot Act" and "your business and personal finances are different according to the IRS", but won't let me open a business account since I don't have a separate EIN. Are they just blowing smoke or is this really a problem?

We're talking Bank of America in case anyone cares.

Now, I realize that the most obvious ways to get around this hurdle are to either get an EIN or to take my banking elsewhere... but I just finally got all my banking consolidated at B of A, and really really don't want to have to do it over again.

Frankly, I've got enough to worry about as far as keeping track of numbers and bank accounts and I don't want to add to the mess because it doesn't make me anything extra. I don't do enough business to make it worth incorporating or paying a CPA or lawyer to do lots and lots of extra paperwork for me. (We're generally talking $5000 or so, max.) I pay estimated tax quarterly... not because I need to, but it keeps me from having a big bill in April. Incorporating in Texas carries a giant paperwork and financial penalty in the form of franchise tax and a lot of other little sticky requirements like filing yearly shareholder meeting minutes with the secretary of state. As a sole proprietor, I only have to file a tiny sales tax form.

The branch manager told me, "Either get the check made out to just your name, or you will not be depositing it here." and dismissed me. My point was that my business tax ID is the same as my personal tax ID, and therefore we are the same entity, so I should just be able to deposit it in my personal account whether it was made out to "SpecialK", "SpecialK Consulting", "Mr. SpecialK is an unsophisticated doofus" or "SpecialK, Esq." etc...

So, hive mind -- what are the actual rules I need to be held to when depositing a check made out to "(My Real Name Here) Consulting"?

For the sake of completeness, I'm in Texas, I am on file with Texas as a sole proprietorship doing business as (My Real Name Here) Consulting, my clients are out of state, I provide form W-9 to my clients and they file 1099-MISC to report their payments to me using my SSN. I report income and expenses using schedule C on my annual tax return. I don't mind that my client has my SSN. I'm not worried about assuming personal liability for client losses or other reasons for incorporating.

Why doesn't my bank want my money? Barring answering that, how do I find a regional vice president or such to complain to?
posted by SpecialK to Law & Government (14 answers total) 4 users marked this as a favorite
I am on file with Texas as a sole proprietorship doing business as (My Real Name Here) Consulting

By this do you mean you're registered as a "DBA" or "Doing Business As"? Have you showed this paperwork to the bank (um, assuming there is some, I dunno, I went the corp route and yeah it's a PITA)
posted by RustyBrooks at 6:49 PM on December 1, 2008

Best answer: You're pretty close to Houston. Someone I met tells me that they're still doing hurricane repair work in that area. They also say that with the economy and financial system, all sorts of corporate worry is raining down on the area. This person also tells me that branch managers at BoA are often treated liked corporate zombies and it takes several layers to get someone who really knows what is going on. They say that someone might be giving the regional manager pressure to keep costs in line from Ike, and that managers down the line can sometimes be ridiculous and get things totally confused. I would try another branch, as this shouldn't be a problem.
posted by geoff. at 7:20 PM on December 1, 2008

I can't speak for BofA, but I do exactly what you describe routinely at my credit union and there is no problem. A couple of suggestions. Endorse the check exactly as written on the front. You could try a different bank branch just to see if they are more friendly. Or you could try making the deposit through your ATM. They may be less likely to argue if the deposit is already entered electronically and no one is present to argue with.

Finally, I generally ask my clients just to make checks to my name, not my business name. Generally clients will ask for a W-9 Form. You put your tax name on the top line and your business name on the second line. When you give them the form, tell them to make the check out to your tax name only. (Don't check the exempt payee box. As long as you give them a valid TIN on your W-9 they shouldn't withhold taxes.)

There is no IRS requirement that you have separate accounts for your personal and business use as long as you keep adequate records. You don't need a separate EIN.
posted by JackFlash at 7:36 PM on December 1, 2008

I'd suggest you just have your clients write checks to your regular name.

For what it's worth, if you do want to separate business and personal finances, there's no need to get an EIN or a board of directors or all that. I incorporated as a one-person LLC. This cost me $85 and about 10 minutes of work online. The IRS treats such entities as sole proprietors, so my SSN applies to both my business and me. I still fill out the same individual tax forms as always; I just have some asset protection now.

I have a separate bank account under the name of my business. Both my personal and my business accounts use my SSN. I endorse checks written to my business name as PatoPata, DBA MyBusiness and deposit them in my business account.

You might check the books published by Nolo Press for clear explanations of the different forms of incorporating.
posted by PatoPata at 8:04 PM on December 1, 2008

If you're curious as to whether it is legal to have a sole prop DBA which includes your name and uses your personal SSN as the TIN, and whether banks will accept that for a business account then, yes, it is legal and yes, they do. I've been doing it for the past 20+ years and in that time have switched banks at least twice, probably more. All the banks had no problem with the DBA for a business account, including a little ol' hometown bank with the cute name of Citibank. I even had a merchant account for processing credit cards when at Citibank, which required various tax forms and declarations to set up, and my sole prop status wasn't a problem. I did have to show my DBA certificate/piece of paper once or twice, but I assume you have that or other proof handy.

However, banks may be more picky nowadays with internal corporate or local rules for accepting business account applications. Also, my business is in Illinois. While I doubt Texas state law makes a special case here, I suppose it could. Texas is a weird state; you can quote me on that. Anyway, there is nothing in the national laws which explicitly disallow use of a sole prop DBA with shared TIN for a banking business account, or else I and a bunch of banks have been breaking the law for quite a while. You'd think someone official would have noticed by now.

Ask for a person higher up the food chain than a front-line drone and check with a main branch if you have problems: it might be that BofA has its own internal policy and you really are screwed if you want to use them, but it could be baloney spewed by the first line of customer service. (That Patriot Act excuse is definitely baloney.) Gripe in an assured and forceful, but non-profane, manner and you should be kicked up to a VP after a while, if only to get rid of you. I've talked to a (fairly intelligent) bank vice president myself to resolve an issue after failing to get satisfaction at a local branch bank -- the bank manager was theoretically on vacation then, although I swear I glimpsed someone in a suit cowering in the back after a 2nd-level drone went away to "check something" about what I said. As I recall, I got the VP's number by calling the customer service line and repeating my story that what I was being told was at odds with the facts. Don't take an initial "no" as a definitive answer if you have evidence to the contrary, Here, you do have that evidence. Vice presidents shouldn't be that hard to get at for a bank, banks are infested with vice presidents. This probably remains true even in these tough economic times for financial institutions.
posted by mdevore at 8:06 PM on December 1, 2008

I say just fill out the IRS form and get your EIN. Consider it part of growing your business, it doesn't really change your tax filing activities, and you can put it on day-to-day business correspondence without having your SSN in a hundred people's hands.

I won't get into details, but I've found BoA to be fine for everyday banking but definitely not on your side if there's a problem. I shut down our business account there several years ago after discovering that their hierarchy was mostly based on buck-passing and shrugging.
posted by crapmatic at 8:20 PM on December 1, 2008

Why not try talking to another bank? If they're fine with it, move. Nothing says you have to stay with BoA, and if they're not serving your needs, dump the bastards.
posted by Class Goat at 9:14 PM on December 1, 2008

(Note: The story below is about Massachusetts. However, I am in Houston, TX now and can put you in contact someone here who can help sort what you can do. I work for him and once asked him about this very thing. He knows what you'd need to do. Just mefi mail me.)

This same thing happened to me in MA. My bank accepted pretty much everything I through at them for a long time. After 2001, they started occasionally bouncing back checks made out to my company name. I called. They said I had to go register with the town they lived in to get a DBA certificate. With cert in hand, I opened a business banking account under the DBA name. I had to do this with Metro Credit Union in Burlington, MA.

My understanding is Harris Country is similar.
posted by tcv at 9:16 PM on December 1, 2008

Not a lawyer, and not located in Texas, but I am certain that this branch manager is full of it. Like mdevore pointed out, the Patriot Act excuse is ridiculous. Also, if your name is in the business name (e.g. Joe Schmoe Consulting) then you do *not* need to file a separate DBA, because you are already doing business as yourself. I would be very surprised if this is not the case in Texas; I doubt all the self-employed plumbers and handymen have filed DBAs or LLCs or anything, when "John Smith Plumbing" works just as well without any paperwork hassle.

That said, I have always had checks made out to my own name so I have not encountered this problem. I would probably fight it on principal though, and definitely go higher up the chain than this fellow who is stonewalling you.

Electronic deposit should get you around the problem in the meantime.
posted by bangitliketmac at 9:24 PM on December 1, 2008

Nthing what's already been said about the Patriot Act excuse. You didn't say what the name is on the account, though. If it's Person X on the account and Person X Consulting on the cheque, the branch droid might be bumping up against not being willing to take the risk with their job/performance review that they let you put a cheque into what technically might not be your account. It's silly, but there ya go.

Sounds like your branch has recently had some sort of fraud and they're getting really uptight about ticking all the boxes. There's no logical reason for them to refuse to accept your cheques, particularly if they've done so in the past and have not had any sort of problem with your account. The ops supervisor at your local branch is probably too low on the food chain to be able to sign off on something like this. If you just talk to your branch manager or whomever is there to deal with the softer side of customer service in the branch, they will likely have the authority to sign off on something like this. I'm thinking the person you need to talk to if you've had your wallet stolen and need to prove you're really you so you can get some cash to get home.

B of A is really bad for this kind of thing, btw. They like business accounts or personal accounts, but they can't handle business in personal. If you want to stay with them, you might want to sit down with that friendly helpdesk droid I've mentioned. They don't want to take time out of their day to sign off on your deposits any more than you want to have them do it.
posted by Grrlscout at 3:41 AM on December 2, 2008

You're running into the Red Flags Rule. It requires banks and other businesses (like car dealerships) that extend or arrange credit to consumers to implement a program to prevent identity theft. It went into effect on Jan 1 2008, but the FTC has delayed enforcement until May 1st of next year because so few businesses even know about it. It is linked to the Patriot Act in that they both have "know your customer" -like provisions, and whatever companies do for the Red Flags Rule can't contradict the provisions of the Patriot Act.

The Red Flags Rule does not specify exactly what companies must do to prevent ID theft, only that they have to create a written program and follow it (although it does provide "representative examples" of red flags, including one exactly like your situation, where the name on the check doesn't match the name on the account). So each company might have different procedures. The "my bank doesn't do this" comments above reflect that either the other banks haven't implemented an ID theft prevention program yet, or that they implemented different processes. I'd guess it is the former, and you will run into this sort of thing more and more as May 1st approaches.

You can file a DBA form for $15 from the Harris County Clerk's office. You should be able to just bring the form to your bank and then you'll be set. If you need an EIN, you can file online for one and get it in a few minutes. I am a small business owner in Texas and, while I use an attorney and CPA for some stuff, the EIN and DBA were both simple enough for me to handle by myself.
posted by txvtchick at 4:55 AM on December 2, 2008

Have you tried just depositing your checks at another branch?
posted by toomuchpete at 5:52 AM on December 2, 2008

I used to work at Bank of America. I didn’t work in Texas and I haven’t worked there in over a year so it is possible policies have changed.

The Teller is correct that is against bank policy to deposit a business check into a personal account. I don't know if this is the law, but it has been bank policy for at least 10 years. If an associate was doing it in the past, they were breaking policy.

The Patriot Act excuse that she is giving is somewhat legitimate, but mostly still an excuse. When the Patriot Act passed, all banks had to set some guidelines for the “Know Your Customer” section. Bank of America’s included stricter ID guidelines and making sure the name on the check matches the name on the account. To me, that shouldn’t really apply because your name is on the check. Consultant is a title and obviously not part of your name. When I was in the Banking Center the Patriot Act excuse was thrown around a lot when an employee knew something was against policy but didn’t know why. Blame it on the Government (which is actually correct in many cases).

Unless things have changed, you should not have a problem opening a business account as a Sole Proprietorship with your own SSN. As others have stated, you may need to show the DBA certificate because “consulting” is tacked on to your name. This should not mean that you need to get an EIN.

If you are running into trouble at the branch, I would suggest that they call their internal Helpline to clarify the requirements and procedures. My last job at the bank was working at the Helpline that walked banking center associates through policy and procedure. Bank policy can be confusing, and the amount of training given to branch associates isn’t always what it should be. That being said, unless I am way off base and things have changed - a banking center manager should know what is really needed to open a business account.
posted by Lapin at 7:16 AM on December 2, 2008

Response by poster: The banking center manager was exceptionally rude and unhelpful, which is the only reason that I was looking for someone to complain to. She actually told the associate that was going to offer to open a business account for me that I would not be able to go that route.

Regardless, I put it in the drive through ATM on the other side of town and according to online banking it's already cleared and I can see a scan of the processed check.
posted by SpecialK at 10:46 AM on December 2, 2008

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