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pcs
04-26-2010, 05:17 PM
Can a creditor take money out of a business account I setup if I am a sole proprietor?

I am not talking about business debt but a personal debt incurred before the business was setup.

I know that my business debt would be my personal responsibility but I don't know if it works the other way too.

I am not setting up this business to try and dodge my debts, which I do plan on paying back, but I don't want them to empty my account when I start getting clients.

Thanks

Business Attorney
04-26-2010, 06:19 PM
A sole proprietorship is not a separate entity - it is you. So yes, a creditor that you owe money personally would have the same rights to go after an account labeled "Bob's Landscaping" as one labeled "Bob Smith."

While forming an entity doesn't protect your business assets from personal creditors in the same way that it protects your personal assets from business creditors, it does provide an extra level that a creditor must deal with that often prevents a creditor from directly going after a business' bank account.

Spider
04-26-2010, 06:58 PM
While I do not doubt that your answer is correct, David, the question was...

Can a creditor take money out of a business account I setup if I am a sole proprietor?

Surely, no-one can "take money out of" a bank account that is not their own. They might be able to get a court judgement to demand payment for debt, but surely the bank is not permitted to take money from one person's bank account and give it to another person.

Isn't it?

Business Attorney
04-27-2010, 12:09 AM
Frederick, of course you are correct that no one can simply take money out of another person's account. But that would be equally true of a personal bank account. It seemed to me that the real question being asked was not about the process by which someone would garnish a bank account but whether setting it up in the name of a sole proprietorship gave it added protection.

nealrm
04-27-2010, 07:48 AM
David, Frederick,
The initial question is somewhat vague on what they are asking. PCS do you wish to provide some additional details that would allow David to give you a better answer.

Of course if they have your account information they can take the money out. In addition, debt collectors have been known to take out money or additional amounts "by accident". So if you are in an adversarial relationship with a debtor or debt collector I would not allow them access to your bank information.

Spider
04-27-2010, 09:08 AM
David - Good! We read two different questions in the original post and now they are both answered.

Neal - How can anyone - adversary or not - "take money out" of another's account, even with their "account information"? By account information, I presume you mean the account number, but everyone to whom you issue a check has your account number, (and your signature!) It seems to me that any withdrawal from your acount without your direct and specific authorization, is illegal.

Is that not so, David?

nealrm
04-27-2010, 09:37 AM
I'm not saying what they do is legal, just that they do it. All they need is the information on your check and a method of submitting electronic withdraws. (Note: The means of getting access to submit electronic withdraw is not trivial) Look at what Wal-mart does. They scan you check and then hand it back to you. Does anyone after that see anything beside the routing number, account number and amount to be debited? NO - the image maybe stored somewhere with hundred's of thousands of others, but it is not used.

Dishonest debt collectors will swear up and down they will only take x dollars but instead take the entire amount. Utilities have also been know to do this, so have other pay as you go services. I personally have had magazines pull funds after the subscription was canceled. I had to contact them for a refund.

Spider
04-27-2010, 10:47 AM
As long as we have established that it is illegal, and therefore not in the normal course of events. I think the original poster was worried that someone could simply withdraw funds from his bank account in the normal course of business.

If it is illegal, there is redress.

alfromla
05-03-2010, 12:28 PM
Yes that is why many people incorporate their businesses so they can keep their personal finance and their business finance separate.