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. The trade name does not create entity separation. A separate EIN does not create entity separation. Only forming an LLC or corporation creates a legal boundary between the owner and the business.

LLCs and Corporations: The Entity Barrier

An LLC or corporation is a separate legal person that owns its own property, including its bank accounts. A judgment against the owner personally does not attach to the LLC’s assets, and a judgment against the LLC does not attach to the owner’s personal assets. This separation is the foundation of business asset protection.

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, the personal creditor has no other path to 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. In bankruptcy, a trustee can step into the sole member’s shoes and exercise the member’s management rights, including liquidating the LLC’s assets. 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 the multi-member charging order protections that a single-member LLC lacks.

Corporations offer similar entity separation. A personal creditor with a judgment against a shareholder can seize the shares themselves but cannot directly access the corporation’s bank accounts. The creditor becomes a shareholder and may be entitled to dividends, but the corporation’s operating accounts remain 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. Using the business account to pay personal expenses, depositing personal income into the business account, or transferring money freely between personal and business accounts without documentation all erode the legal separation. A creditor will argue that the owner treated the LLC as a personal account, and the court should 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. LLCs and corporations must maintain basic formalities: separate books, separate tax returns, proper capitalization, and documented decision-making. An LLC that has never held a meeting, never kept separate records, and operates entirely at the owner’s discretion looks like a sole proprietorship with extra paperwork. Courts will treat it accordingly.

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. Some states allow “reverse piercing,” where a personal creditor argues that the LLC is the owner’s alter ego and the court should treat the LLC’s assets as the owner’s property. Reverse piercing requires showing that the entity is a sham, typically through a combination of commingling, undercapitalization, and disregard of formalities. Not all states recognize reverse piercing, but those that do can reach the business bank account directly.

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.

Merchant accounts that process credit card payments are also reachable. A creditor can serve a writ of garnishment on the business’s payment processor, intercepting credit card receipts before they settle into the business bank account. For businesses that depend on card transactions, this can be more disruptive than a bank levy because it cuts off incoming revenue rather than seizing money already on deposit.

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. Liquid assets in bank accounts and receivables are where creditors start because they 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, and 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.

For LLCs taxed as disregarded entities (the default for single-member LLCs), the IRS treats the LLC’s assets as the owner’s assets for federal tax purposes. The IRS can levy a single-member LLC’s bank account to satisfy the owner’s personal tax debt. Multi-member LLCs and corporations are separate taxpayers, and the IRS generally must pursue the entity’s own tax obligations through a levy on the entity, not the owner’s personal tax debt through the entity’s account.

State tax agencies typically need a court order or statutory authority to levy business accounts, and the rules vary by state. 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, not a real business. 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.

For liquid assets beyond what entity structuring can protect, an offshore trust moves ownership to a foreign trustee outside U.S. court jurisdiction entirely. Personal funds held in accounts that receive only exempt income like Social Security, disability, and VA benefits receive automatic federal protection under 31 CFR Part 212, a protection that exempt bank accounts provide regardless of entity structure.