A dormant business bank account occurs when an account has no owner-initiated transactions—such as withdrawals, deposits, and cash, check, automated clearing house (ACH), or wire transfers—for more than 24 months. This can apply to deposit, investment, and retirement accounts. Interest accrued is not considered a transaction to keep an account active.
Dormant business bank accounts occur most often with companies that closed. If you only have one business bank account and it becomes dormant, chances are your business is already in financial trouble. If the dormant account is one your business doesn’t use anymore, it likely won’t significantly impact your business.
If you’re looking for a new business bank account, Bluevine is an excellent choice. You can earn 2.0% annual percentage yield (APY) on balances of $250,000 or less and keep track of your account 24/7 on its mobile app and website, avoiding any potential dormancy issues.
Key takeaways
- Business bank accounts become dormant when owners do not initiate transactions for more than 24 months.
- Banks will charge monthly fees for dormant accounts. If the account’s balance is zero, the bank may close it.
- You can reactivate a dormant account by making transactions.
- If you let your account remain dormant beyond a certain dormancy period, which could be three or five years, depending on which state your business operates in, and do not respond to your bank’s attempts to contact you, it will turn your funds over to the state through a process called escheatment.
How a Business Bank Account Becomes Dormant
Before a business checking account becomes dormant, it first becomes inactive. An account is classified as inactive if there are no owner-initiated transactions for 12 months. Some banks might reach out at this point to notify you that your account is now inactive.
After another 12 months without activity, it becomes dormant. Note that your bank may charge a monthly fee while it is inactive or dormant. After a specific dormancy period three or five years, depending on which state your business operates in , your bank will notify you that your account has become dormant and attempt to return your funds or allow you to make the account active again.
If your dormant account has a zero balance, the bank may simply close your account. If there are any funds left unclaimed in dormant accounts, the bank will turn them over to the state as abandoned funds.
Dormant business bank accounts occur less frequently than dormant personal bank accounts. The reason is simple: Businesses should have financial experts keeping track of where the company’s finances are located. It should be much more difficult for a business account to remain open, without transactions, for a long enough time for the account to become dormant.
What To Do When Your Account Becomes Dormant
If you receive a notification that your account has become dormant, you have three options:
- Make a transaction and reactivate the account: As long as the bank hasn’t turned the funds over to the state, you can still initiate a transaction on the account, which reactivates it.
- Withdraw or transfer the remaining funds and close the account: If you are not using the account and don’t need it, you can transfer the funds or withdraw them and close the account. Check out our guide on how to close a business checking account.
- Do nothing, and the funds will be turned over to the state: The worst option would be to do nothing. Once the dormancy period ends, the escheatment process will begin, and the bank will turn over the funds to the state. At this point, you’ll have to attempt to reclaim those funds from the state.
Escheatment Process & Retrieving Unclaimed Funds
If the bank cannot contact the account owner to notify them of their dormant account, it will turn the funds over to the state in a process called escheatment. Escheatment can occur once the state-required dormancy period has expired.
Each state establishes its own rules for its dormancy period. Generally, the period begins with the last owner-generated transaction on the account, such as a deposit, withdrawal, and check issue date.
Below, we’ve listed the bank account dormancy periods for all 50 states and Washington, D.C.
Some states will have specific rules in addition to the dormancy period, so if you are looking for more information, or are interested in reclaiming funds, contact your state’s treasurer’s office or your bank or visit these pages:
- Federal Deposit Insurance Corporation’s (FDIC’s) list of unclaimed property information
- National Association of Unclaimed Property Administrators’ (NAUPA’s) list of unclaimed property links
- Missing Money’s website
There is no time limit for how long you have to recover unclaimed funds from the state.
How To Avoid A Dormant Business Bank Account
- Plan for what happens to accounts if the company dissolves: One of the most common ways business bank accounts become dormant is when companies become dormant. When drawing up a business plan and organization documents, detail what happens to bank accounts in the event of business failure.
- Open a business bank account with online/app access: Almost every business bank account has an app or at least online access. Use that to keep track of your accounts and be mindful of accounts that are not used regularly. You can check out our breakdown of the best small business checking accounts for a list of providers that offer online banking access.
- Close unneeded accounts, especially if you’re being charged to keep them: Don’t keep accounts you don’t need, especially if there are monthly fees. You don’t want a situation where an account becomes overdrawn because of fees. If the money is earning interest, keep it, but make sure you have regular transactions on the account.
- Schedule regular transactions in accounts with infrequent usage: If you need to keep an account open (because it earns interest), schedule regular transfers into or out of the account. This allows you to keep the account open without worrying about it becoming dormant.
Frequently Asked Questions (FAQs)
A business bank account is generally considered dormant when the account has no owner-initiated transactions for more than 24 months. These could include deposits, withdrawals, and transfers.
Banks must turn over money in dormant business bank accounts to the state once a set escheatment period elapses. That period ranges from three to five years and varies from state to state. Funds turned over to the state can be reclaimed by the rightful owner at any time with no time limit.
The dormancy period can start in as little as 12 months but typically begins at 24 months. Generally, an account becomes inactive at 12 months and dormant after 24 months of no owner-initiated transactions. Once the escheatment period elapses, which runs from three to five years from the last owner-initiated transaction, the funds are surrendered to the state.
Dormant accounts are accounts that have had no banking activity for more than 24 months, whereas frozen accounts are accounts that authorities have restricted access to due to suspicious or unlawful activity.
Bottom Line
While a dormant business bank account won’t likely devastate a healthy business, it becomes a hassle if you must reclaim abandoned funds from the state. If your only business bank account becomes dormant, there’s a chance your business is struggling. Make sure your financial expert monitors where you have business bank accounts open. They should also ensure regular transactions for all your accounts to avoid them becoming dormant.
