In theory, you can cash a check made payable to a corporation because no state or federal law prevents you from doing so. In practice, few if any banks allow people to cash checks made payable to corporations because of legal issues that could arise as the result.
Under federal law, every bank must have documented procedures in place for identifying people who cash checks and conduct other kinds of banking transactions. Most banks require customers to present at least one form of valid government-issued identification when cashing a check. You cannot require a corporation to identify itself because, beyond being registered with the state as a business entity, a corporation has no actual identity. You could make a case than an employee of the business represents that business, but you could also argue that a shareholder, as an owner, represents the business. From a practical perspective, a bank cannot let every employee and shareholder cash checks and a bank has no way of verifying who owns or who works for a corporation. Therefore, most banks disallow the cashing of corporate checks.
When the officers of a corporation open an account, they sign a bank signature card that the bank keeps on file. A bank manager could make an exception to the standard bank procedures and allow an officer of a corporation to cash a check on behalf of the business. However, if that business later became insolvent, unpaid employees, creditors and tax authorities could sue the bank for enabling an employee of the corporation to cash the check, and in many states the bank may have to pay restitution to these parties.
The Internal Revenue Service has the authority to penalize banks and financial institutions that enable people to avoid taxes or to commit fraud. If a bank cashes checks for a corporation, then no paper trail exists to show that the corporation ever received the money contained within the check. Therefore, the IRS could make a case that the bank enabled the corporation to commit tax evasion. The risk of incurring IRS fines and penalties ranks high among the reasons that banks do not cash checks made payable to corporations.
Aside from not cashing corporate checks, few banks allow customers to exchange corporate checks for official checks. Official checks are cash equivalents that banks typically cannot place deposit holds on. The bank itself issues the official check rather than the customer, and that means that the bank has to honor the item. If shareholders or board members successfully dispute the negotiation of a check that was used to buy an official check, the bank still has to honor the official check, which means that the bank incurs a loss.
- Bankers Online; Corporate Check Cashing; November 2003
- Bankers Online; Cashing Corporate Checks; Andy Zavoina, et al.; September 2001
- Bankers Online; Pitfalls When Exchanging Corporate Checks for Cashier's Checks; Ken Golliher; November 2001
- Consumer Financial Protection Agency. "How Quickly Can I Get Money After I Deposit a Check Into My Checking Account? What Is a Deposit Hold?" Accessed March 30, 2020.
- HelpWithMyBank.gov. "Answers About Funds Availability." Accessed March 30, 2020.
- HG.org. "Consequences of Writing a Bad Check." Accessed March 30, 2020.
- Bank of America. "Financial Center FAQs." Accessed March 30, 2020.
- HelpWIthMyBank.gov. "Answers About Overdraft/NSF Fees and Protection." Accessed March 30, 2020.
- Kmart. "Check Cashing." Accessed March 30, 2020.
- Consumer Financial Protection Bureau. "Can a Bank or Credit Union Cash a Post-Dated Check Before the Date on the Check?" Accessed March 30, 2020.