Your Company's Assets by Familiarizing Yourself with the $100,000
We've all heard the saying "Don't bite off more than you can
chew," but unfortunately, not everyone, including banks, always
listens. For example, when a bank makes more loans than it can afford
a failure of that institution is often the result. Considering the
recent federal takeover of Pasadena, Calif.-based IndyMac, which
was taken over by federal regulators on July 11 with total assets
of $32.01 billion and total deposits of $19.06 billion as of March
31, 2008, many business owners are now wondering, "What if
that happens to my bank?"
To best protect themselves in the event of a bank failure, business
owners need to first understand what's protected through the Federal
Deposit Insurance Corp. (FDIC). For starters, Corporations, partnerships
and unincorporated associations, including for-profit and not-for-profit
organizations, are all insured under the same ownership category.
"These accounts are insured only up to $100,000 at each separately
chartered insurance institute," says Jim Deveney, chief of
the deposit insurance section with FDIC. Deveney explains though,
that if a company has multiple accounts-an operating account, a
payroll account, etc.--at one location they are not separately insured.
"These accounts are all added together and insured for up to
$100,000," says Deveney. A business can, however, have multiple
accounts spread out across different banks (one at Wachovia, one
at Bank of America, etc.) and then each account is insured individually
for up to $100,000.
An exception for businesses comes when the company places funds
on behalf of employee benefit accounts.
"Those are insured up to $100,000 per the participant's interest
in the plan," says Deveney.
But what if a company has more than $100,000 in its banking account
and that institute fails? The FDIC only insures that account up
to $100,000; are the uninsured funds gone for good? Not exactly,
according to Deveney.
"In the unlikely event of a bank failure, if the account is
in your name alone, you're entitled to a portion of the amount over
insured based on what we receive from the sale of the assets,"
So what can companies do to best protect their assets? Deveney
says it's as simple as being aware of the $100,000 limit.
"You can also check your accounts with the Electronic Deposit
Insurance Estimator (EDIE)," he adds.
It's also wise to check your balance in the account on a regular
basis. Funds for checks written but not cleared still sit in the
account. Your checking account balance may show just a few thousand
dollars, but if you have a large check that hasn't cleared, your
bank will still show that money as in your account.
to access the EDIE.
HERE for a copy of FDIC's Your Insured Deposits brochure.
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