Owner Cashing Check Payable to Business - John Burnett

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Owner Cashing Check Payable to Business
by John Burnett, BOL Guru
BIO AND CONTACT INFO

Question: On a DBA account, can the owner get cash back on a check made out in the business's name? It has been opened up as a personal checking account.

Answer: The legitimate arguments against cashing checks or permitting cash back from checks payable to businesses are two-fold. First, there is the question of whether the business might be moving income off its books. Not an issue that I think a bank needs to be terribly concerned with, but it ticks me off personally.

The second issue is one of authority. With most businesses, one cannot determine readily whether the person with the check has authority to act on behalf of the payee. But with a sole proprietorship, that issue really is moot, since the individual is presumably the business and vice versa. They have "unity of identity." So you're left with the question of taxation, which is really less of an issue for a sole proprietor, too.

So what I think we're left with is a matter of policy. It could be confusing to ask tellers to apply different standards to different types of businesses. It's a lot easier to say, "If the check is payable to a business name, it will not be cashed." Therefore, applying this policy to sole proprietorships is logical. Even more so when you consider that a lot of tellers (and others) still confuse the abbreviation "d/b/a" with a designation as a sole proprietor. Do you want your tellers to cash a check payable to "Minnie's Motors" based on knowledge that the account is captioned "Minnie, Inc., d/b/a Minnie's Motors"?

The fact that the account is established as a personal account is irrelevant to the issue.

First published on BankersOnline.com 8/18/03

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