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Home >> Accounts >> Business Accounts
Confused Deposits
A contractor doing business as, John Smith, Sole Proprietor, is licensed and has a bank checking account in the name of his proprietorship. He chooses to conduct business as Community Contractors, which is not licensed, and for which there is no bank account. Smith accepts and endorses check payments as Community Contractors and then deposits the check payments into the account of John Smith, Sole Proprietor. Is it a violation of banking practices to allow Smith to make deposits in this manner? Whether it is a violation or not, what UCC and/or banking principles regulate matters of this kind?
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 Best practices for a bank would require that Smith document the fact that he is licensed or registered to do business using the assumed name of Community Contractors. Imposing that requirement lessens the risk that Smith is stealing checks payable to a separate business using the Community Contractors name.
If Smith is indeed doing business as Community Contractors, there's no violation of law other than perhaps a state requirement that he register his assumed name with the state, county or city (requirements vary widely from state to state), and possibly failing to obtain a contractor's license, but neither of those problems has anything to do with the deposit of the checks.
Published on BankingQuestions.com 1/14/09
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