September 17, 2016

Question About Depositing Checks Into LLC Bank Account

I assume I will occasionally get a check payment from a client made payable to my personal name instead of the LLC name. So, I plan to set up the LLC’s bank account to accept deposits with either name. Is this a problem (with respect to protecting the “corporate veil”, i.e., the appearance of commingling business and personal funds)? Does it matter if this occurs rarely vs often? Thanks!

– JD, Colorado

Answer

This does happen occasionally, and no matter how many times you tell your clients otherwise, they will send checks in your name.

As an attorney, I have accidentally received settlement checks in my personal name instead of the name of the firm I work for (and my name isn’t part of the firm name).

I simply sign the back of these checks and hand them to the office manager and everything works out fine.

As far as your corporate veil goes, yes, this is technically commingling.

The most dangerous kind of commingling is taking checks written out to your LLC and depositing them in your own account–not the other way around as you’re describing.

If this happens infrequently, I would not be too concerned.

Remember too that commingling is only one factor in veil piercing, and is by itself usually insufficient–there needs to be some element of fraud or other unjust behavior on your part to justify piercing the veil. In other words, the commingling that gets a veil pierced is when it is associated with the underlying fraud. A typical example is an owner of a company draining company funds for personal expenses instead of paying the company’s creditors.

There is nothing unjust or fraudulent about depositing a check into your LLC account that was written to pay for services/products provided by your LLC simply because your client wrote the wrong name on the check.

In conclusion: encourage your clients to write a check to the proper name, but don’t let it keep you up at night if you get the occasional check written to you personally instead of for the business.

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