LLC & Trust, no EIN - How can I open a bank account?

Question

Hi BP,

I'm representing a borrower in FL and we are at clear to close on his cash out refinance loan (investment property). We cannot close because he wouldn't be able to cash the check for his cash out proceeds. The check cannot be made to him individually since property is held in a Trust. Borrower doesn't have a business bank account that matches the vesting on title, which is ABC LLC as trustee for ABC Trust.

His LLC and Trust both do not have EINs.

He is running into resistance from banks they are explaining that an EIN is required.

Has anyone experienced this and or found a workaround?

Chris Seveney · Answer

@David Bilandzija

How does an LLC not have an ein. Get an ein it takes ten minutes

Sergey A. Petrov · Answer

Something sounds fishy but let’s assume it is all setup correctly and legally and your client has the legal right to execute documents/ sign on behalf of the trust and the llc (one would have to assume that to be the case otherwise you wouldn’t be under legal contract to sell - the person signing the docs must be authorized by the legal entity that legally owns the property and the check with the proceeds would be payable to that entity). If that is the case, they take the check and endorse it to “themselves”. On the back of the check write “Pay to the order of [insert personal name]” then sign as John Doe for ABC Trust, ABC LLC, whichever the case may be following the ownership chain. The bookkeeping and accounting would still have to flow through the appropriate entities and your client should seek legal and tax advice from their professionals

Matthew Hamilton · Answer

I wish that was the case, the IRS is making me call to get one. Then when I call they say call volume is too large, call back later.

In my case, I am still putting the property into the LLC without the EIN, as I will be able to get one sooner or later.

Sergey A. Petrov · Answer

The bank wouldn’t go very far with their “due diligence”. If I bring a check to my bank that was payable to someone else and I endorsed it over, they assume I am authorized to sign on behalf of whoever it was initially payable to. They wouldn’t ask me for articles of incorporation, operating/ formation agreements, Board resolutions specifically naming me as authorized on behalf of that entity, etc. They may put an extra long hold on the deposit or have it reviewed by their fraud department before releasing the hold but I suppose some of it also comes down to he relationship with the bank. If I have $5m on deposit and the endorsed over check for the proceeds is $1k, they’ll likely take it without question. And since you are the agent on at least one side of that transaction there is likely some liability for you there as well…

David Bilandzija · Answer

@Sergey A. Petrov Sounds like a reasonable approach and I think your suggestion is worth checking out with the borrower's bank. Thank you for the response.

LLC & Trust, no EIN - How can I open a bank account?

LLC & Trust, no EIN - How can I open a bank account?

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