Does the FDIC Cover Business Accounts?

The Federal Deposit Insurance Corporation (FDIC) is best known for insuring the bank deposits of individual consumers. But its coverage also extends to deposits by corporations, partnerships, limited liability companies (LLCs), and unincorporated associations—including for-profit and not-for-profit organizations—up to certain limits. Here's what you need to know.

How the FDIC Works

Created by Congress in 1933 in response to the many bank failures during the Great Depression, the FDIC is an independent federal agency that exists to protect the U.S. banking system—and the financial system in general—and ensure that consumers and businesses have confidence in its safety.

In addition to insuring customers' deposits (up to certain limits), the FDIC will step in when a member bank fails, taking it over and running it temporarily until it can find another bank (or banks) to assume those duties.

This was seen in March 2023, when the FDIC stepped in after the highly publicized failures of Silicon Valley Bank, in Santa Clara, California, and Signature Bank, in New York City. In both cases, the FDIC assured depositors that they would receive the full value of their accounts. (In this rare instance, they extended coverage even to accounts that exceeded the normal maximum FDIC coverage.) The FDIC also created temporary "bridge banks" to keep the banks' everyday operations running as smoothly as possible.

Many of the accounts at both of those failed banks belonged to businesses—and sometimes totaled in the many millions of dollars. All of those were eligible for FDIC coverage, like individual consumers' accounts.

What Kinds of Business Accounts Does the FDIC Cover?

As with consumer accounts, business accounts that are eligible for FDIC coverage include checking accounts, savings accounts, money market deposit accounts, certificates of deposit (CDs), cashier's checks, money orders, and "other official items issued by a bank."

Requirements for FDIC Coverage

There are two main 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 business accounts. (Sole proprietorships and revocable trusts are eligible for coverage under the rules governing individual consumer accounts. Government accounts fall into a separate category called Public Unit 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.

Limits on FDIC Coverage

Total deposits in eligible business accounts from a corporation, partnership, LLC, or unincorporated organization at a bank are normally covered by the FDIC for up to $250,000.

(The March 2023 failures of Silicon Valley Bank and Signature Bank caused the FDIC to waive those limits, but it isn't known if that policy will apply in any future bank failures.)

For example, if a corporation has a checking account with $150,000 and a CD for another $150,000 at the same bank, the FDIC only insures $250,000—it will not insure 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 a corporation, partnership, LLC, or unincorporated organization at the same bank are not used to calculate the total deposits of a business; they are subject to separate limits.

Bank customers can use the FDIC's Electronic Deposit Insurance Estimator (EDIE) to calculate their total coverage at an FDIC-insured bank.

What the FDIC Does Not Cover

FDIC coverage does not apply to all types of accounts or financial products for individuals or businesses, even if they were purchased through that bank.

Among the things that the FDIC does not cover are: investments in stocks, bonds, and mutual funds; cryptocurrency assets; life insurance products; and Treasury bills, bonds, or notes. (Treasury securities are, however, backed by the full faith and credit of the U.S. government, making them extremely safe.)

The FDIC also provides no coverage for the contents of safe deposit boxes or losses that result from theft.

The Bottom Line

The FDIC covers both individual and business accounts at FDIC-member banks. However, not all types of accounts are covered and there are normally limits on the amount of coverage. In the case of businesses, those limits (currently $250,000) may be inadequate for the amount of money they plan to deposit, so they may need to spread their accounts across multiple banks.