Online Transfers between Personal/Business Account

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Question:

Can you cite any regulatory prohibition, industry best-practices or any other guidance regarding the commingling of funds conducted via web-based transfers between linked personal and business(corp., llc.) accounts, owned or otherwise controlled by the same person? Information from the IRS on this subject is vague. My gut feeling is that this activity raises potential tax evasion issues and may be a reportable offense under SAR guidelines.

Answer:

When dealing with an entity, the first consideration is one of authority to make the transfers. The mere fact of ownership of an LLC or corporation does not give one authorization to make such transfers; specific authority to do so can only be given by the entity's governing body (board of directors, for example).

Second is the matter of accountability for an entity's funds. What if a shareholder or a creditor of the entity has a claim on the entity (for unpaid dividends, unpaid debts, etc.)? If it becomes known that funds have been transferred from the business without legal authority, the bank could be pursued for its part in facilitating the transfers.

First published on BankersOnline.com 5/24/10