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#665406 - 01/12/07 03:03 PM Cashing Checks Payable to a Business
CrashDavis Offline
Gold Star
Joined: Jun 2005
Posts: 283
I hope this is the correct forum to use with this question. I believe I know the answer but want to ask the question to be sure.

I am reviewing cash outs at one of our smaller locations. I have noted they are cashing checks payable to restaurants in their town. I don't believe these business establishments are incorporated but are either sole proprieterships or partnerships.

Should they be depositing the checks to their account and if they need petty cash just write a check for what they need.

My concern is who are they giving the cash to. The owner or just a worker and how do we know he is taking the cash back to the business.

Am I correct?

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#665445 - 01/12/07 03:27 PM Re: Cashing Checks Payable to a Business CrashDavis
John Burnett Offline
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John Burnett
Joined: Oct 2000
Posts: 40,086
Cape Cod
Your instincts are right, Baseballfan. There are a couple of issues. First, there's the issue of authority. Except in the case of a sole proprietorship, you can bet that no one has the legal authority to take checks payable to the business and cash them at the bank. That's true for corporations, LLCs, partnerships and any other legal entity other than a sole proprietorship. Boards of directors don't vote that kind of authority for individuals, in my experience. So if one of those checks comes bouncing back, how can you legally charge it back to the business?

The second issue is the one you've raised. How does your teller know that the business gave the OK to have those checks cashed? What's to prevent someone from intercepting mail or raiding the cash register and stealing checks payable to the business?

We've had this question raised in different ways hundreds of times on Bankers' Threads. If you're looking for more ammo, do a search of the Threads using "+business +checks" (without the quotation marks) as the keywords, and set the search period to 2 or three years.
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John S. Burnett
BankersOnline.com
Fighting for Compliance since 1976
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#665463 - 01/12/07 03:34 PM Re: Cashing Checks Payable to a Business John Burnett
CrashDavis Offline
Gold Star
Joined: Jun 2005
Posts: 283
Thanks John, you have always been helpful to me and others with good insight on all subject.s

Thanks again.

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