Does the FDIC Cover Business Accounts?

The Federal Deposit Insurance Corporation (FDIC) was created in 1933 as part of the U.S. federal government’s response to the stock market crash of 1929 and the Great Depression that followed.

A very important piece of resulting legislation, the Glass-Steagall Act, established the FDIC as one of many comprehensive safeguards against the financial calamities of the time. Many of these safeguards have come to rescue the economy, or at least mitigate damage, during times of financial crisis.

The FDIC insures bank deposits owned by corporations, partnerships, limited liability companies (LLCs), and unincorporated associations—including for-profit and not-for-profit organizations 

Eligible business accounts for coverage from the Federal Deposit Insurance Corporation are checking accounts, savings accounts, money market deposit accounts, certificates of deposit (CDs), cashier's checks, money orders, and other official items issued by banks covered by the FDIC.

Key Takeaways

  • The Federal Deposit Insurance Corporation (FDIC) insures bank deposits from most business types. 
  • Most common business accounts are eligible for FDIC coverage, including checking, savings, money market, CDs, cashier's checks, and money orders.
  • The two requirements for business account qualification for FDIC coverage are: one, the company making the deposit has to be organized under applicable state laws; and two, the main purpose of the company cannot be to increase FDIC deposit insurance coverage.
  • The FDIC does not cover all account types, including investments in stocks, bonds, and mutual funds; safe deposit boxes; life insurance products; treasury bills or bonds; and losses that result from theft.

FDIC coverage is meant to ensure that consumers and businesses have confidence in the U.S. banking and deposit system.

Understanding How the FDIC Covers Business Accounts

Requirements for FDIC Coverage

There are two requirements for a business account to qualify for FDIC coverage.

  1. The corporation, partnership, LLC or unincorporated organization making the deposit has to be organized under applicable state law. Deposits made by sole proprietorships, revocable trusts or government entities are not considered to be business accounts.
  2. The main purpose of operation of the corporation, partnership, LLC or unincorporated organization making the deposit has to be other than to increase deposit insurance coverage by the FDIC.

Details of FDIC Coverage

As with consumer accounts, total deposits in eligible business accounts from a corporation, partnership, LLC or unincorporated organization at a bank are covered up to $250,000.

For example, if a corporation owns a checking account with $150,000 and a CD for another $150,000 at the same bank, the FDIC only insures $250,000, not the remaining $50,000. The corporation would need to transfer the remaining $50,000 to another bank for those funds to be eligible for FDIC coverage.

Deposits in personal accounts from owners or members of the corporation, partnership, LLC or unincorporated organization at the same bank are not used to calculate the total deposits of a business account.

The FDIC does not cover all types of accounts for individuals and businesses. Among the types of accounts that the FDIC does not are: investments in stocks, bonds, and mutual funds; safe deposit boxes; life insurance products; treasury bills or bonds; and losses that result from theft.

Use the FDIC's estimator tool to calculate the coverage of your business accounts at an FDIC-insured bank.