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It might be surprising but despite the rise of electronic payments, debit cards and credit cards, checks are still a popular means of payment in the United States. And while cashing a check should be a simple and stress-free experience, depending on the circumstances, it can get complicated.
You may know the process for depositing checks made out to you personally, but what about business checks? To cash a business check, you’ll need to understand the difference between a personal check and a business check, and the requirements of banks or check-cashing services. Here’s everything you need to know before cashing a business check.
What Is a Business Check?
A business check is a check that’s based on a company’s assets rather than those of an individual person. When you write a business check, the money is pulled from the business banking account and not from the business owner’s personal account. This is a big reason why it’s so important to open a business bank account before you need to deposit or withdraw funds.
The process for cashing a business check depends on the nature of the check. For example, a payroll check is a type of business check that is written out to an employee. But business checks can also get more complicated than that, especially if they’re written to other businesses. For instance, businesses may use checks to pay suppliers and vendors, or creditors they owe a debt.
The process of cashing a business check will depend on the type of check. Some business checks are easier to cash than others.
Business Check Cashing vs. Personal Check Cashing
The main difference between a business check and a personal check is that a personal check is made out to you, using your name. A business check, however, is made out to your small business.
Cashing a personal check should not be too difficult, as long as the check is accurately written out to you in your name.
Because business checks draw funds from a business account belonging to a company, they can be more difficult to cash. If you are trying to cash a business check, it’s important to understand your options and be prepared for any challenges you might encounter.
Issues You May Face When Cashing a Business Check
Keep in mind that business checks can be harder to cash, even if you’re the owner of the business. This is often the case when the check has been made out to your business rather than to you (as the business owner). You may also face obstacles if the business check is made out to multiple people. This may be the case if the business is owned by more than one person.
It’s worth mentioning that payroll checks are business-specific checks that are excluded from this. Although they are business checks, payroll checks are made out to employees with their personal legal name. Therefore, it can be cashed just like personal checks.
How to Cash a Business Check
It’s important to understand that cashing a business check is different from depositing it. Just about anyone can deposit a business check into the company’s business checking account. You don’t need to be the owner or an authorized signatory on the bank account. This is because the person depositing the check won’t receive cash, and no fraud can be committed.
Not all banks will allow you to cash a business check that is made out to the business and not you as the business owner. Your best bet is to cash your check with the bank where you have your business checking account. Who can cash a business check depends on how your business operates.
Apply for an AccountSole Proprietorship
If your business is a sole proprietorship, you and your business are considered the same entity. In this case, only you—the business owner—can cash checks made out to your business. If your business has an official name, be sure to add a “doing business as,” or DBA, designation to your business checking account. This way, you can cash checks made out to both you personally and your business.
Partnership, Corporation, or LLC
If you have a partnership, corporation, or a limited liability company (LLC), cashing a business check is can be more complex. First, you need to have a business bank account for your LLC, corporation or partnership. Also, depending on the banking institution, it may not be an option. Only signatories indicated on the account can successfully endorse a business check in order to cash. That is, of course, if your bank allows it.
If it does, you’ll need to sign the back of the check with your name and title, and your signature. It must match the one the bank has on file for the account. You’ll likely also need to provide a driver’s license, state ID, or some other acceptable form of identification to prove your identity. Some banks also require a fingerprint before they will cash a business check.
If your banking institution does not allow the cashing of business checks made out to a business, then you can deposit the check and make a withdrawal for the same amount from the account. This can serve the same purpose. Keep in mind that a bank will often hold at least a percentage of a check’s value until it clears before it makes the funds available.
Can You Cash a Business Check Without a Business Bank Account?
Having a small business bank account keeps your money organized and safe. It’s also important for keeping your business assets separate from your personal assets for legal purposes.
However, if you do not have a business checking account and need to cash a business check, there are other ways to do this. For example, Money Services, which can be found at local retailers, cashes checks made out to businesses. You’ll need one of the following:
- US driver’s license
- State-issued ID
- Military ID
- Resident alien ID
- Matricula consular ID
- US-issued passport
- Tribal Nation ID
Another option is to find a check-cashing service in your area. Just keep in mind that check-cashing services are usually not free. You may end up paying a flat fee or a percentage of the check amount, so it’s a good idea to compare multiple options and make the most fruitful decision for you and your business.
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1 Minimum $50 deposit required. See your Deposit Account Agreement for more details.
North One is a financial technology company, not a bank.
Banking services provided by The Bancorp Bank, N.A., Member FDIC.