Does the FDIC cover business accounts?

Does the FDIC cover business accounts?

The Federal Deposit Insurance Corporation (FDIC) was established in 1933 as part of the federal government’s response to the 1929 stock market crash and the ensuing Great Depression.

The resulting piece of very important legislation, the Glass-Steagall Act, established the FDIC as one of many comprehensive safeguards against the financial catastrophe of the day. During the financial crisis, many of these safeguards have been used to rescue the economy, or at least mitigate the damage.

FDIC insures bank deposits owned by corporations, partnerships, limited liability companies (LLCs), and unincorporated associations, including for-profit and nonprofit organizations

Qualifying business accounts insured by the FDIC include checking accounts, savings accounts, money market deposit accounts, certificates of deposit (CDs), cashier’s checks, money orders, and other official items issued by FDIC-covered banks.

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key takeaways

  • The Federal Deposit Insurance Corporation (FDIC) insures bank deposits for most types of business.
  • Most common business accounts are eligible for FDIC insurance, including checking, savings, money market, CDs, cashier’s checks, and money orders.
  • Two requirements for eligibility for an FDIC-covered business account are: one, the depository corporation must be organized under applicable state law; and second, the corporation’s primary purpose must not be to increase the coverage of FDIC deposit insurance.
  • The FDIC does not cover all account types, including investments in stocks, bonds, and mutual funds; safe deposit boxes; life insurance products; Treasury bills or bonds; and losses from theft.

FDIC coverage is designed to ensure that consumers and businesses have confidence in the U.S. banking and deposit system.

Learn how the FDIC covers business accounts

Requirements for FDIC Coverage

There are two requirements for business accounts to be eligible for FDIC coverage.

  1. A corporation, partnership, LLC or unincorporated organization making deposits must be organized in accordance with applicable state law. Deposits from sole proprietorships, revocable trusts or government entities are not considered business accounts.
  2. The principal business purpose of the corporation, partnership, limited liability company or unincorporated organization making deposits must not be to increase the FDIC’s deposit insurance coverage.

Details of FDIC Coverage

Like consumer accounts, qualifying business accounts from corporations, partnerships, LLCs, or bank unincorporated organizations can hold up to $250,000 in total deposits.

For example, if a company has a $150,000 checking account and another $150,000 in CDs at the same bank, the FDIC only insures $250,000, not the remaining $50,000. The company needs to transfer the remaining $50,000 to another bank for the funds to qualify for FDIC insurance.

Deposits in personal accounts by owners or members of a corporation, partnership, LLC, or unincorporated organization of the same bank are not used to calculate total deposits in business accounts.

The FDIC does not cover all types of accounts for individuals and businesses. Types of accounts that the FDIC does not have include: investments in stocks, bonds, and mutual funds; safe deposit boxes; life insurance products; Treasury bills or bonds; and losses from theft.

Use the FDIC’s Estimator Tool to calculate the coverage of your business account with an FDIC-insured bank.

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