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FDIC Consumer News - Summer 2018
25th Anniversary Edition

[2004] Basics of Deposit Insurance for Businesses

Excerpted and updated from "Basics of Deposit Insurance for Businesses," Fall 2004.

The FDIC receives many questions about deposit insurance from businesses and other entities that want to know if all their money would be fully protected if their bank were to fail. If you own a business or manage the money of a non-profit organization, here are some basics you should know about your FDIC insurance coverage.

Deposits of a corporation, partnership or “unincorporated association” (such as a religious organization, charity or homeowners association) are insured up to $250,000 in total. These business-type accounts, though, are insured separately from any personal accounts of the entity's stockholders, partners or members held at the same institution.

The FDIC gets calls, for example, from corporations or partnerships asking if it is possible to deposit more than $250,000 in a bank on behalf of multiple partners or principals and still be fully insured. The answer is no — it's $250,000 of insurance to the corporation alone or the partnership alone. The insurance coverage doesn't increase based on the number of owners.

To quality for coverage of up to $250,000 of FDIC insurance separate from the personal deposits of the owners or officials, the organization must be engaged in an “independent activity.” That means the entity cannot exist solely for the purpose of increasing the deposit insurance coverage of the owners.

Note: While a corporate account is insured for up to $250,000 in total, funds held in connection with employee benefit plans, such as pension or profit-sharing plans, might qualify for coverage up to $250,000 for each employee's share if FDIC requirements for this separate category are met.

In addition, a corporation's accounts for different purposes (such as one account for research projects and another for a building project) are each separately insured to $250,000 only if they belong to separately incorporated subsidiaries. Otherwise, they are added to any other deposit accounts of the corporation and the total is insured up to $250,000.

Deposits of a sole proprietorship are insured together with any personal funds the business owner may have at the same bank. A sole proprietorship is a business owned by just one individual rather than a corporation or partnership. Many small stores or service companies operate as sole proprietorships.

Unlike corporations or partnerships, if you are the sole proprietor of a business, your personal accounts and the accounts of the sole proprietorship at the same institution are insured together as individual accounts up to $250,000 in total.

If you have questions about your insurance coverage, call the FDIC toll-free at 1-877-ASK-FDIC (1-877-275-3342). Also read the deposit insurance information posted on the FDIC website. Single copies of selected publications, including “Your Insured Deposits,” the FDIC's comprehensive guide to deposit insurance coverage, are available free of charge by completing our online order form or by contacting the FDIC’s Public Information Center at the toll-free phone number above. If you are a person who is deaf or hard-of-hearing, please call 1-800-925-4618.