Corporate Law s corp banking question

[edwardporter]

I have a small s-corp (4 people including myself). We wanted to open a new bank account for the s corp and we're attracted to the apy (3-4%) of some of the internet banks out there now. However the offers are for personal bank accounts. Is there anything illegal about using one of these personal checking accounts as our main bank account? We don't write an exorbitant amount of checks every month and do payroll with an outside service. Anything wrong with such a set-up?

thank you for your time and help,

-Edward Porter

 

[David_Staub]

We wanted to open a new bank account for the s corp and we're attracted to the apy (3-4%) of some of the internet banks out there now. However the offers are for personal bank accounts. Is there anything illegal about using one of these personal checking accounts as our main bank account?r

"Illegal" is probably not the right word, but it could present a number of problems. A bank develops its own financial products for various types of customers. It presumably would not allow a business entity to open a personal account. That means one of the shareholders would probably have to open the account in his or her own name. If that is the case, think about this:

-What happens if the shareholder dips into the funds?
-What happens if the shareholder's creditors go after the funds in the account?
-If the corporation has financial difficulties, will the presence of a company account in a shareholder's name lead to "piercing the corporate veil" and expose that shareholder, and perhaps the others as well, to personal liability for corporate obligations?

I would suggest you weigh these risks and see if there aren't more attractive ways of obtaining the return. For one thing, if the S corp has extra cash perhaps it should simply pay a dividend and let the shareholders invest the money on their own.