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Can an individual open a business account if they are suspended by the secretary of state-

San Jacinto, CA |

from what i understand the Patriot Act says a bank must verify information before opening an account.-- Id SS card EIN number for business. What if the business has been suspended by the Secretary of State..? Is the bank allowed to still open the account even if it is suspended ? A business under suspension can not to do business of any kind, so I just don't understand how a bank can open an account for said business and if this is legal under Patriot Act.

HOA has been stolen by an individual who has opened a bank account under associations name. She has obtained checks, atm card, credit cards and much more. I would like to shut down bank account but have been unable to since 2011. This is a 55+ community and I'm afraid we as homeowners will eventually lose are homes due to the damage/debts she is causing. I live in Riverside County CA, if you can stop this lady please call me with a quote to retain you. Thank you

Attorney Answers 3

Posted

Disclaimer: The materials provided below are informational and should not be relied upon as legal advice.

You need to provide additional information to clarify your question. Generally, you are correct that a business entity (e.g. corporation, LLC, LLP) that has lost its good standing with the California Secretary of State loses its privilege to conduct business in California. Be sure to consult your own attorney to protect your legal rights.

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Posted

As a general rule you are correct. Most banks will verify the "goodstanding" (non-suspension) of a corporation prior to opening an account.

The above is general legal and business analysis. It is not "legal advice" but analysis, and different lawyers may analyse this matter differently, especially if there are additional facts not reflected in the question. I am not your attorney until retained by a written retainer agreement signed by both of us. I am only licensed in California. See also avvo.com terms and conditions item 9, incorporated as if it was reprinted here.

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8 comments

Frank A. Natoli

Frank A. Natoli

Posted

Really? I have opened many a business account and the banks have only asked for the cert of formation. Had that been generated before the co fell out of good standing I do not think the bank would ever even know.

Michael Charles Doland

Michael Charles Doland

Posted

I used to do a lot of bank work, especially for the European banks out here, and still have lots of bank contacts for the foreign investment corporations we set up and represent. The Patriot Act has had a huge effect on the "know your client" standards here in Sourthern California. I cannot say what the "back room" investigates even after the account is opened, but it is not rare for our banks to refuse to open accounts for certain startups or to revoke and cancel an account recently opened.

Asker

Posted

Ok, Mr. Donald I like you, kinda already. I feel the same about the "know your client" standard. But is this a "grey" area? Or is it a fact that the bank must verify EIN number is in good standing?

Michael Charles Doland

Michael Charles Doland

Posted

I do not know without research if it is a legal duty of the bank to pre-investigate or post-verify under the Patriot Act or any other law affecting banking.

Frank A. Natoli

Frank A. Natoli

Posted

I'm not sure either Mike. Based on my experience I would be surprised if that was the case, but I may very well not be correct.

Asker

Posted

So, basically I can go into a bank and open an account under "Jacks hot dog stand" obtain checks, credit cards, debt etc and there is nothing anyone can do to collect debts from "jacks hot dog stand" because the law states that a revoked or suspended entity can not do business, can not submit any claims, defend any claims against etc. Wow! this is incredible!. You would think that the Patriot Act would specifically state " EIN" must be in good standing and verified by banking institutions. Its public information on the web it would take them a whole two minutes to help protect businesses and individuals from identity theft.

Asker

Posted

I think one of you all educated individuals should file a class action law suit against these banks because basically these financial institutions have giving criminals the "keys to the safe" when it comes to business theft. I wonder how often business owners look at the web site to check who is listed as the process server on file with the business they are associated/ financially responsible for?!!?

Michael Charles Doland

Michael Charles Doland

Posted

Polite request: next time post the additional facts up front. You would have gotten a much more focused analysis. Use the Find a Lawyer function using Riverside and "business litigator". Also, it you have proof of "theft" meaning monetary diversion consider contacting the fraud division of the local police.

Posted

The bank will likely not check into whether your entity has been suspended. They will only verify the info that they are required to. If you operate the business, the principals can be held accountable not the bank.

I am not certain how the Patriot Act matters here, but if you have some concerns that are not clear from your posting you should certainly consult a lawyer in private.

Most of us here, including myself, offer a free phone consult.

Best regards,
Frank
Natoli-Lapin, LLC
(see Disclaimer)

The law firm of Natoli-Lapin, LLC (Home of Lantern Legal Services) offers our flat-rate legal services in the areas of business law and intellectual property to entrepreneurs, small-to-medium size businesses, independent inventors and artists across the nation and abroad. Feel free to call for a free phone consultation; your inquiries are always welcome: CONTACT: 866-871-8655 Support@LanternLegal.com DISCLAIMER: this is not intended to be specific legal advice and should not be relied upon as such. No attorney-client relationship is formed on the basis of this posting.

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2 comments

Michael Charles Doland

Michael Charles Doland

Posted

I almost always agree with you, even when we apparently disagree, because I think you are really "in the trenches", know your local practice from a practical as well as a legal point of view, and have a lot of experience.

Asker

Posted

I agree with you that the principals are responsible, this being in my case 28 homeowners. These 28 homeowners own two deeds, one to the property that home sits on and the other being 1/28th of middle court yard. If someone wins a law suit against " association" ( middle court yard) How do they collect? , remember " association" is suspended

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