Anachostic

Today I had my bank (MidFlorida) call me and tell me they were refusing my deposit. My check was made out to "David Smith Consulting", where David Smith is my name. I was under the impression that this was valid, since it's not a DBA and as long as your name is in the company name, it is considered personal.

I had deposited two checks previously made out to the same name, but this time, they said no. When asked about the prior two times, they said it shouldn't have been processed. Even Wells Fargo, when I was with them, didn't complain about checks made to my consulting company.

MidFlorida says I need to open a business account for this check to be processed. Aside from the hassle of having two accounts, it's not going to cost me anything. I'm just curious if I can convince them otherwise that it's legally valid. Also, I'm kind of curious how I can prove this is a business, since it's not incorporated and I don't have any filings on it. I just claim the income on my 1040. I'm going to take my EIN paperwork just in case, but the whole situation is just so sudden and weird.

Has anyone been through this and have any insights?

LaCostaRacer

Haven't heard about this before from a legal standpoint. Perhaps MidFlorida is trying to boost the number of client accounts in order to make it larger than it really is- perhaps they would like to sell the business? Perhaps bank pricing is based on number of accounts and actual dollar amount total.

MR1

Situations like that sent me to a mid size credit union. I've never looked back. Banks seem to think that they are the customer and are doing you a favor by accepting your money.
The banks have lost their collective minds. I have been depositing checks like that in various financial institutions for years, mostly without problems.

Anachostic

Thanks guys. They were closed when I got to them today. Will try tomorrow night.

nfnsquared

Tell them: "OK, thanks for that info. In that case, please close my account and issue me a cashier's check. I'll wait while you do it."

Anachostic

So damn retarded. I picked up my check and went to set up a business account. I can't. The bank requires that I have a fictitious name registration to open a business account. So I have a check that I can't deposit or cash and I can't open a new account to deposit it in.

So I considered calling the client and having them reissue my two checks (plus a pending invoice on top of that), but figured they'd probably deduct their stop payment fees. So for the same amount of money, I might as well register the damn fictitious name.

The whole reason I chose the company name I did in the first place was that I understood that if your full name is in the company name, you don't need a d/b/a. Now the rule is if it's not your name exactly, it's not personal? Sole proprietorship is a farce.

JaredGMS

For more reasons that that
- Bad tax consequences
- No limited liability protections
- No employee liability protections (if you have any employees)


I tell my clients to ALWAYS make themselves into either an LLC or S-Corp (unless a C-corp is necessary, or unless they make so little that it's cost prohibitive)

ttribe

Create an LLC. It won't time much time or money to do it and, once you do, you can open a business account, not to mention the legal and tax benefits. I just went out on my own and had a LLC created in no time.

JaredGMS

Just make sure it's done right....Rocketlawyer, Legalzoom, etc. are shit services that create shit entities. Get a lawyer and make sure they know what they are doing.

I can't count the number of times I've either personally or seen those entities get creamed in court, and the owners opened up to liability.

ttribe

I didn't use an online service, I just filled out the paperwork provided by the State of AZ. Perhaps I should have the docs I've executed scrutinized.

JaredGMS

To protect yourself, I would.

Each state is different, but say here in CA, if you just did the LLC paperwork with the Sec of State, you DO NOT have an LLC. LLC's require an operating agreement to be valid.

Additionally, accounting and money issues can be an easy way to open liability to the owners of an "LLC".

In my experience, if an attorney and prof accountant don't save you 3-4 times what you've spent, they didn't do a good job. It's money out of pocket up front, but it can save your ass in the end.

ttribe

Right now, I'm the sole member and I provide forensic accounting/expert witness services. There are really no assets and on the accounting side I'm pretty conservative. That being said, once I pull in a partner an operating agreement is definitely a must-have; as is a tax accountant. I took enough tax to get my accounting degrees and pass the CPA exam, but I'm no tax expert.