Will the FDIC Insure My Money if it’s Held by an LLC or Corporation?
If you own your own business and haven’t protected it with a corporate or limited liability structure, you may want to reconsider—even if you’re not concerned about liability. For many businesses, liability isn’t a concern. Maybe the business is operated on the side out of your home, or you have no employees, or you sell your products at a local farmers market and there is no inherent risk in the business. But if you’re doing well and accumulating assets, incorporating your business can help to protect your money. Here’s how:
When you make a deposit into your checking account at a bank, you’ve likely seen the signs that the FDIC (Federal Deposit Insurance Corporation) guarantees that each depositor is insured up to at least $250,000. Now, that is a significant amount of money, but if you’ve begun to accumulate more than the insured amount, you definitely feel protective over what you’ve earned. This is where forming a corporation or LLC can help.
If you haven’t incorporated your business, it is automatically considered a sole proprietorship. This means that there is no legal distinction between you and the business. All of your business and personal earnings will be deposited into the same account, or if you open a separate account just for the business income, the money still won’t be protected, as the deposits will still be considered the possession of a single depositor. However, if you form a corporation or LLC, the entity is legally separate from you and it can have its own bank account, which is also insured up to $250,000.
You can utilize this separate account strategy in a variety of ways to protect your money. You don’t even need to actually have a business to form an LLC or corporation. You can form the company and open an account in its name to basically hold and protect your money. All you need to do is keep the entity current.
Want to know more? Learn how to protect your assets.