Bank Problems Archives

Bank of America Ignores Arizona Law

My client who went to Bank of America to open a bank account for his LLC owned by his revocable living trust that he signed digitally sent me an email that said:

“I just went to Bank of America and they refused to open my bank account because [the trust was] not notarized. I showed them the statute from your help document for that exact situation and they didn’t seem to care and said it was per policy that they can’t accept the electronic signature.”

Because I know Bank of America, Wells Fargo, and Chase employ idiots, I give the purchasers of my Gold LLC formation package that includes a revocable living trust a letter that contains the following text:

What to Do If You Encounter an Idiot Banker Who Says the Trust Must be Notarized or the Bank Won’t Recognize Electronic Signatures

If you try to open a bank account and the banker says the bank will not open the account because your trust agreement and/or certification of trust was electronically signed or because they were not notarized then show the banker the text below that is the exact text contained in the applicable Arizona statutes.

Arizona Trust Law

The following Arizona statutes state how an Arizona trust is created. Note: These Arizona statutes do not require that an Arizona trust agreement be witnessed or notarized.

Arizona Revised Statues Section 14-10401. Methods of creating trust states:

“A trust may be created by:

1. Transfer of property to another person as trustee during the settlor’s lifetime or by will or other disposition taking effect on the settlor’s death.

2. Declaration by the owner of property that the owner holds identifiable property as trustee.

3. Exercise of a power of appointment in favor of a trustee.”

Arizona Revised Statues Section 14-10402. Requirements for creation of an Arizona trust states:

“A. A trust is created only if all of the following are true:

1. The settlor has capacity to create a trust.

2. The settlor indicates an intention to create the trust.

3. The trust has a definite beneficiary . . .

4. The trustee has duties to perform.

5. The same person is not the sole trustee and sole beneficiary. [Note: The same person is not the sole trustee and sole beneficiary of a trust if the trust has an initial trustee, a successor trustee, an initial beneficiary and one or more future beneficiaries.]

B. A beneficiary is definite if the beneficiary can be ascertained now or in the future, subject to any applicable rule against perpetuities.

Arizona’s Electronic Signature Statute

Arizona Revised Statues Section 44-7007. Legal recognition of electronic records, signatures and contracts states:

“A. A record or signature in electronic form cannot be denied legal effect and enforceability solely because the record or signature is in electronic form.

B. A contract formed by an electronic record cannot be denied legal effect and enforceability solely because an electronic record was used in its formation.

C. An electronic record satisfies any law that requires a record to be in writing.

D. An electronic signature satisfies any law that requires a signature.”

Lesson to Be Learned

Do not try to open a bank account with Bank of America if your LLC is owned by a trust.

Richard Keyt2025-03-16T08:25:53-07:00March 16th, 2025|Bank Problems|0 Comments

Another Wells Fargo Idiot Banker

President of an Arizona nonprofit corporation I formed recently called while at the bank trying to open a bank account for the corporation. The corporation filed IRS form 1023EZ and was a 501(c)(3) tax-exempt charity. The banker said her bank could not open a bank account until the corporation could prove its “tax classification.” I asked her what she meant by “tax classification” and she said it means is the corporation a C corporation or an S corporation? I said neither because it is a 501(c)(3) tax-exempt charity. She insisted the corporation had to be a C or an S because she was ignorant of federal income tax law.

Bottom line: I told my client to go to another bank and hopefully would not be helped by a person who is a business idiot.

I do not recommend that businesses use Wells Fargo, Chase or Bank of America. They are not customer friendly.

Richard Keyt2023-07-15T09:37:45-07:00July 15th, 2023|Bank Problems|0 Comments

Well Fargo Bank Demands LLC Change its Principal Address

Question: Client received a letter from Wells Fargo bank that said the client’s new LLC’s principal address on file with the Arizona Corporation Commission cannot be 24 W. Camelback Rd, #467, Phoenix, AZ 85013. That address is also the mailing address of the LLC’s statutory agent. Do I have to amend my LLC’s Articles of Organization to change the LLC’s principal address?

Answer: Arizona Revised Statues Section 29-2101.B states: “The Articles of Organization [of an LLC] must state. . . the [LLC’s] principal address, which may be the same as the mailing address of the company’s statutory agent.” Arizona Revised Statues Section 29-3102.20 defines Principal Address as “the mailing address of a limited liability company or foreign limited liability company, whether or not located in this state.”

24 W. Camelback Rd, #467, Phoenix, AZ 85013 is a UPS mail box. You are dealing with an idiot banker who is ignorant of Arizona LLC law. The banker is telling you that your LLC’s principal address stated in its Articles of Organization filed with the Arizona Corporation Commission cannot be the LLC’s statutory agent’s mailing address even though that address is expressly authorized in Arizona Revised Statues Section 29-2101.B. Only an uniformed idiot would say that. In forming 8,700+ LLCs I can only remember one other person whose banker said the same thing. It is very common for businesses to have a PO box or a UPS mail box.

The bank has no legal basis to say that the LLC’s principal address cannot be 24 W. Camelback Rd, #467, Phoenix, AZ 85013, because that is KEYTLaw, LLC’s, mailing address and KEYTLaw, LLC is the LLC’s statutory agent.

Recommendation: Go to another bank, but never use Wells Fargo, Bank of America or Chase Bank.

Richard Keyt2023-04-17T09:04:50-07:00April 16th, 2023|Articles of Organization, Bank Problems, FAQs, Questions People Ask|0 Comments

Will My Lender Call My Loan If I Convey Land to My LLC?

Question: I own a rental home that I want to put into an LLC for asset protection, but it is subject to a deed of trust that has a due on sale clause in it. If I form an LLC and convey the home to the LLC will the lender exercise the due on sale clause and demand I pay off the loan?

Answer: A due on sale clause is text in the deed of trust that says that the lender can demand payment of the balance owed on the loan if the borrower transfers ownership of the land. This is a common clause in residential loan documents.

I’ve formed 4,000+ AZ LLCs into which people transferred land that was subject to a mortgage or deed of trust. I’ve never had an LLC client’s lender call the loan because of the transfer. If your lender were to call your loan Arizona law says that if you cure the default by transferring the land back to you the lender must stop the foreclosure.

The purpose of a due on sale clause is to give the lender an option to call the loan when the borrower ceases to own or have any involvement with the land. When the borrower transfers the land to the borrower’s LLC the borrower continues to be involved with the land and will make the future payments. That’s why lenders don’t call the loan when the borrower transfers the land to the borrower’s LLC.

Advice: Don’t contact the lender and ask for permission. The standard response is you cannot do it and you may get yourself on the lender’s radar.

Richard Keyt2023-04-16T08:32:25-07:00April 15th, 2023|Bank Problems, FAQs, Operating LLCs, Questions People Ask|0 Comments

Chase Bank Refused to Open LLC Account Because It Could Not Verify LLC’s Phone Number

Question: What is a verified LLC phone number? I tried to open a bank account for my LLC at Chase Bank. The bank clerk said that he could not open a bank account for the LLC unless he could “verify” the LLC’s phone number. My client who is the sole member and manager of the LLC gave the banker all of his phone numbers. The banker was unable to verify any of the phone numbers and declined to open a bank account for the LLC.

Answer: I don’t have a clue what a verified phone number is. In forming 9,500+ Arizona LLCs since 1992 I’ve never had anybody call or email me and say their bank required a phone number (verified or unverified) to open a bank account. My advice was go to another bank, preferably not Chase, Wells Fargo or Bank of America.

Richard Keyt2023-04-06T12:19:47-07:00April 6th, 2023|Bank Problems, FAQs, Operating LLCs, Questions People Ask|0 Comments

Idiot Banker Won’t Open a Bank Account for an LLC Owned by a Trust

Question: You setup an LLC for me that is owned by a revocable living trust you created. I gave the bank a copy of the Articles of Organization, the Operating Agreement, the Trust Agreement and the Certification of Trust, but the bank won’t open an account for the LLC unless you send the bank a letter that says that I am the trustee of the trust that is the member of the LLC?

Answer: You are dealing with an idiot banker because he/she wants somebody who is not an owner of the LLC or affiliated with the LLC, i.e., me, to sign a letter that states who owns the trust. Ask the idiot banker if another bank employee can sign the letter because that person has the same connections to the LLC and the trust as I have.

Your Certification of Trust and your Trust Agreement show that you are the trustee, aka the “owner” of the trust. Why doesn’t the banker know that? It’s because he or she is an idiot.

I’ve formed 8,700+ LLCs and only one other time has a bank idiot asked me to sign a letter before opening an account. The other time the idiot banker wanted me to sign a letter as the LLC’s statutory agent stating that the LLC’s address was the address displayed on the Arizona Corporation Commission website. Why wouldn’t the idiot ask the owner of the LLC to sign that letter?

Go to another bank or a different branch. I don’t recommend that LLC owners open accounts with Chase, Wells Fargo or Bank of America.

Richard Keyt2023-04-06T12:19:32-07:00March 29th, 2023|Bank Problems, FAQs, Miscellaneous, Operating LLCs, Questions People Ask|0 Comments

Watch Out for Ignorant Bank People

Question: I went to the bank to open my LLC bank account and they need to know what kind of LLC I have. The bank wanted to know if I have an S LLC, C LLC or partnership LLC.

Answer: You need to go to another bank that knows how to deal with LLCs. The State of Arizona only has two types of LLCs, i.e., an LLC and a professional LLC (PLLC). You have an LLC.

There are no such terms as S LLC, C LLC or partnership LLC. The person you are talking to is ignorant, which is troubling. He or she may be asking for the LLC’s tax method under the internal revenue code, which could be:

Sole proprietorship
C corporation
S corporation or
Partnership

Those terms refer to the four possible federal income tax methods availabe to LLCs under the Internal Revenue Code. The terms do not describe a type of LLC.

The bank does not need to know how the LLC is taxed. The default tax method for your two member LLC is partnership. The LLC will be taxed as a partnership unless it files a timely IRS form 8832 (election to be taxed as a C corporation) or an IRS form 2553 (election to be taxed as an S corporation). The subject of the four possible LLC tax methods is discussed in great detail in your Operations Manual in your LLC portfolio.

Richard Keyt2023-04-06T12:20:36-07:00October 30th, 2013|Bank Problems, FAQs, Operating LLCs, Questions People Ask|0 Comments

How an LLC Owned by a NonUS Citizen / NonUS Resident Opens a US Bank Account

Question: I am not a resident or citizen of the United States. I want to form a limited liability company in the U.S. to own and operate a business or to own investment real estate. How do I open a bank account in the name of the LLC?

Answer: I form a lot of Arizona LLCs for people who are not residents or citizens of the United States, aka nonresident aliens. Opening a US bank account for the US LLC can be a very big problem. The US Patriot Act imposes substantial limits and restrictions on the ability of a US bank with respect to creating a US bank account for a people and entities.

The number one new account requirement is that the bank must positively identify the person who seeks to open the bank account. Positive ID means two things:

Sufficient documentation such as a passport to prove the identity of the person who seeks to open the bank account, and

The presence of the person who seeks to open the bank account personally in front of the bank employee who is opening the account.

The banks seem to be getting tougher with respect to the personal ID requirement. This week I met with a nonresident alien client from Australia who opened two LLC bank accounts with Wells Fargo for his two Arizona LLCs two years ago. He did come to Phoenix to present himself to the bank personnel in order to open the accounts.

The client told me that he came to Phoenix this week because Wells Fargo notified him that it was closing ALL LLC BANK ACCOUNTS IN THE US IF THE LLC IS OWNED BY A NONRESIDENT ALIEN OR ALIENS. Wells Fargo closed his LLC bank accounts, but did allow him to open a personal bank account while he was present at the bank.

If somebody tells you that they know of a bank that will open an LLC bank account for a nonresident alien without the need for the nonresident alien satisfying the two requirements described above, don’t buy it. I personally know that MidFirst Bank and Commerica Bank had opened LLC bank accounts without requiring the nonresident alien owner of the LLC to satisfy the two requirements listed above. When supervisors found out about the accounts, they closed the accounts and fired the bank officer.

One potential solution to the problem is for the LLC to have a member or manager that is a US citizen or legal resident. That person could open a bank account in the US for the LLC. However, this solution creates its own set of problems. The person who opens the bank account is taking a risk that if the LLC is involved with anything that is illegal he or she could be in big trouble, perhaps criminal trouble.

Richard Keyt2023-04-06T12:23:31-07:00September 5th, 2013|Bank Problems, FAQs, Forming LLCs, How Do I, Questions People Ask|3 Comments