Can a Business Bank Account Be Garnished?

A business bank account can be garnished, but whether a creditor can reach it depends on who owes the debt and how the business is structured. A sole proprietor’s business account has no legal separation from the owner’s personal assets, so any judgment creditor can garnish it. An LLC or corporation’s bank account belongs to a separate legal entity, and a personal creditor generally cannot reach it directly.

The reverse also applies. A creditor with a judgment against the business can garnish the business account but generally cannot reach the owner’s personal accounts, as long as entity separation has been maintained. When that separation breaks down (through commingling, personal guarantees, or failure to observe formalities), the protection disappears in both directions.

Sole Proprietors Have No Protection

A sole proprietorship is not a separate legal entity. The business and the owner are the same person under the law, even if the business has its own trade name, its own bank account, and its own EIN. A creditor with a judgment against the owner can garnish the business account. A creditor with a judgment against the business can garnish the owner’s personal account. There is no legal barrier between the two.

This is true regardless of how the account is titled. A bank account in the name of “Smith Consulting” that belongs to a sole proprietor is legally identical to the owner’s personal checking account. Neither a trade name nor a separate EIN creates entity separation. Only forming an LLC or corporation creates a legal boundary between the owner and the business.

LLCs and Corporations

An LLC or corporation is a separate legal person that owns its own property, including its bank accounts. Money in the entity’s account belongs to the entity, so a judgment against the owner personally does not attach to it. The owner holds an interest in the company, and a personal creditor’s remedies run against that interest.

When a personal creditor holds a judgment against someone who owns an LLC, the creditor’s primary remedy is a charging order, a court-issued lien that redirects distributions from the LLC to the creditor. A charging order does not give the creditor management control over the LLC, access to the LLC’s bank accounts, or the ability to force distributions. The creditor waits until the LLC voluntarily distributes money to the owner, and the charging order intercepts that distribution.

In states that treat the charging order as the exclusive remedy against LLC membership interests, a personal creditor cannot use the member’s interest to reach the LLC’s bank account. A Florida appellate court enforced this principle in Young v. Levy, reversing a trial court that had issued a writ of garnishment against an LLC to intercept member distributions. The court held that a garnishment writ directly contradicted the LLC statute’s “sole and exclusive” charging order provision. The LLC can continue operating, paying expenses, and holding cash without distributing anything to the judgment-debtor member.

Single-member LLCs are weaker. Outside bankruptcy, Florida’s statute lets a court order a sole member’s interest sold when charging-order distributions will not satisfy the judgment within a reasonable time. In bankruptcy, the sole member’s interest passes to the trustee. The court in In re Albright held that a single-member LLC’s assets were reachable because the trustee could exercise the sole member’s unrestricted management authority. Adding a second member, typically an irrevocable trust, invokes multi-member charging order protections in states that draw a line between one-member and multi-member LLCs.

Corporations offer similar entity separation. A personal creditor with a judgment against a shareholder can levy on the shares and have them sold under execution, but cannot directly reach the corporation’s bank accounts. The buyer at that sale becomes the shareholder and takes whatever rights the shares carry, including any right to dividends. The corporation’s operating accounts stay the corporation’s property.

When Entity Protection Fails

Entity separation protects business bank accounts only as long as the entity is treated as genuinely separate from the owner. Courts disregard the entity barrier when the facts show the business is really just the owner operating under a different name.

Commingling. The legal separation erodes when an owner uses the business account to pay personal expenses, deposits personal income into it, or moves money freely between personal and business accounts without documentation. A creditor argues that the owner treated the LLC as a personal account and asks the court to treat it the same way. Once a court agrees, the business account is reachable just as if the owner were a sole proprietor.

Failure to observe formalities. Corporations are expected to keep minutes, hold meetings, and document decisions. A creditor points at whatever is missing. LLCs are held to a lower standard. Florida’s LLC statute states that a company’s failure to observe formalities is not a ground for imposing liability on a member. Even so, an LLC with no separate books, no separate tax returns, and no boundary between the owner’s money and the company’s money gives a creditor the facts to argue that the company and the owner are the same.

Personal guarantees. A business owner who personally guarantees a business loan or lease has given the creditor a direct claim against the owner’s personal assets. If the business defaults, the creditor can pursue both the business account and the owner’s personal accounts simultaneously. The entity barrier still exists for other creditors, but the guarantor has voluntarily crossed it for that specific obligation.

Alter ego and reverse piercing. Under “reverse piercing,” a personal creditor argues that the entity is the owner’s alter ego and asks the court to treat the entity’s assets as the owner’s property. Florida’s Third District Court of Appeal recognized the remedy in Estudios v. Swiss Bank Corp., a corporate case. The remedy reaches only assets the owner moved into the entity to escape a liability that already existed. No Florida appellate court has applied it to an LLC, where a member’s personal creditor normally gets only a charging order.

Courts elsewhere have applied the doctrine to LLCs, as in Litchfield v. Howell (Conn. App. 2002), where an owner’s alter ego use of two LLCs let her creditor reach the companies’ assets.

What Else Can Be Garnished Beyond the Bank Account

A creditor with a judgment against a business is not limited to the business bank account. Accounts receivable, meaning money owed to the business by customers, can be garnished through a writ directed at the customer who owes the money. The creditor intercepts the payment before it ever reaches the business.

Credit card receipts are reachable before they land in the business’s operating account. The garnishee is the acquiring bank that collects card settlements and deposits them into the merchant account, or a payment platform like Square, Stripe, or PayPal that holds the money before passing it on. A processor that only routes transaction data owes the business nothing and has nothing to garnish. For a business that runs on card sales, a writ served on the right institution catches money the owner cannot pull back.

Equipment, inventory, and real property owned by the business can be reached through judgment liens and court-ordered sales, but these require additional legal proceedings beyond a simple garnishment writ. Creditors start with bank accounts and receivables because liquid assets are the easiest to seize.

IRS and Government Levies

The IRS does not need a court judgment to levy a bank account. A federal tax lien attaches to all property and rights to property belonging to the taxpayer. The IRS can serve a levy notice directly on any bank holding the taxpayer’s funds. For sole proprietors, the IRS can levy both personal and business accounts without distinction.

A single-member LLC that has not elected corporate treatment is disregarded for federal income tax, and the regulations treat its activities as a branch or division of the owner. A multi-member LLC and a corporation are classified as separate entities, so a member’s or shareholder’s personal tax debt is collected from that person. Payroll taxes are the exception. Since 2009 even a disregarded single-member LLC is the employer in its own right and is treated as a corporation for that purpose.

A levy for the owner’s separate personal tax debt does not automatically reach the LLC’s own bank account. The federal tax lien for that debt attaches to what the owner personally owns (the membership interest and any distributions the LLC pays). The IRS’s collection manual tells revenue officers that a levy naming the owner does not attach accounts in the LLC’s name. IRS counsel treats the company’s account as reachable only when the company is the owner’s alter ego or nominee, holding money that is really the owner’s.

Some state tax agencies can freeze and levy a business account administratively without a court order, the same way the IRS does. Child support enforcement agencies can also garnish business income through income withholding orders, though these typically target distributions to the owner rather than the business account itself.

How to Protect a Business Bank Account

Protecting a business bank account starts with maintaining genuine entity separation. The LLC or corporation must be more than a name on the account. It must operate as a real business entity with its own books, its own tax filings, and a clear boundary between the owner’s money and the entity’s money.

Keep accounts separate. Never deposit personal income into the business account. Never pay personal expenses from the business account. If money needs to move between the business and the owner, document it as a distribution, a loan, or a capital contribution.

Add a second member to a single-member LLC. A single-member LLC is vulnerable in bankruptcy and in states that do not treat the charging order as the exclusive remedy. Adding a second member, typically an irrevocable trust, activates multi-member LLC asset protection provisions, including the charging order exclusive remedy in states that provide it.

Capitalize the entity properly. An LLC with $100 in its account and $500,000 in revenue looks like a pass-through shell. Courts evaluating piercing claims consider whether the entity had adequate capitalization for the risks it assumed.

Avoid unnecessary personal guarantees. Every personal guarantee is a hole in the entity barrier. Negotiate guarantees only when required and for the narrowest scope possible.

An offshore trust is the next step for liquid assets beyond what entity structuring can protect. The trustee is a foreign institution, and the assets sit outside U.S. court jurisdiction.

When Social Security, VA, federal retirement, or railroad retirement benefits are deposited directly into an account, the bank has to leave up to two months of those payments available even when a garnishment order arrives. That protection follows the deposits, and a business owner gets it on the same terms as anyone else holding an exempt bank account.