Each depositor insured to at least $250,000 per insured bank

Winter 2011/2012

Your Deposits: Options for Small Businesses

Earn interest on checking accounts. As of July 21, 2011, a federal prohibition against the payment of interest on business checking accounts was repealed. As a result, corporations and partnerships can now have interest-bearing checking accounts that are insured for up to a total of $250,000 combined with any other interest-bearing deposits the business may have at the same bank, including certificates of deposit (CDs), savings accounts and money market deposit accounts. Also remember that the deposits of a sole proprietorship — an unincorporated business owned by one individual using a business name — continue to be insured together with any personal funds the owner may have at the same bank, up to $250,000 in total.

Obtain unlimited insurance coverage on certain deposits through the end of 2012. Martin Becker, an FDIC Senior Deposit Insurance Specialist, advises that if a small business has significantly more cash on hand than $250,000 and it wants to have 100 percent of the funds fully insured by the FDIC, it can open a “noninterest-bearing transaction account” (a checking account that cannot pay interest) and have unlimited insurance protection on that account through December 31, 2012. This temporary, unlimited deposit insurance coverage is based on a provision of the Dodd-Frank financial reform law of 2010. (While these transaction accounts are primarily used by businesses with large balances in their checking accounts, any depositor qualifies.)

Save for retirement. There are a variety of options for the personal funds of a small business owner — from IRAs and SEPs to 401(k)s — that can be used to save for retirement and save on taxes. The Fall 2011 FDIC Consumer News featured an article on the different ways a small business owner can save for retirement (online at www.fdic.gov/consumers/consumer/news/cnfall11/retirementaccounts.html).

To learn more about the deposit insurance coverage of business and personal accounts, see More Help for Small Businesses.