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
Bankers' Threads User #8