Question & Answer
Question: Can a partnership account be an interest bearing account-a NOW account?
Answer: According to the wording in the regulation ... "NOW accounts are only available to individuals and sole proprietorships; corporation, partnerships, associations or organizations operated primarily for religious, philanthropic, charitable, educational, fraternal, or other similar purposes...not operated for profit..."
The Board Interpretation on Regulation D makes it even more specific. Under 2-275-NOW ACCOUNT ELIGIBILITY, in part reads, "In response to many requests for rulings, the Board has determined to clarify the types of entities that may maintain NOW accounts... Individuals...Any individual may maintain a NOW account regardless of the purposes that the funds will serve. Thus, deposits of an individual used in his or her business (including a sole proprietor or an individual doing business under a trade name) are eligible to maintain a NOW account in the individual's name or in the DBA name. However, other entities organized or operated to make a profit, such as corporations, partnerships, associations, business trusts, or other organizations may not maintain NOW accounts."
Thanks to Grace Theveny Senior Regulations Analyst Community Affairs Department Federal Reserve Bank of Philadelphia
Copyright © 1995 Bankers' Hotline. Originally appeared in Bankers' Hotline, Vol. 5, No. 11, 8/95
First published on 08/01/1995