Can Businesses Buy CDs? Eligibility, FDIC Insurance, and Taxes

Yes, a business can buy a CD. Banks and credit unions offer certificates of deposit to corporations, LLCs, partnerships, sole proprietorships, and nonprofits, and the mechanics are the same as a personal CD: you deposit a lump sum, leave it alone for a set term, and earn a fixed rate.¹ What differs for a business is the paperwork at account opening, how federal deposit insurance applies to entity accounts, and how the interest gets taxed.

Which Businesses Qualify

Virtually every legal business structure can open a CD. C-corporations and S-corporations, LLCs, general and limited partnerships, sole proprietorships, professional corporations, and unincorporated associations are all eligible, and nonprofits commonly use CDs for reserves or endowment funds.¹

The account has to be opened in the entity’s legal name, not in an owner’s or officer’s personal name. That separation protects liability shields, keeps the deposit on the business’s books, and makes the tax reporting clean.²

You also aren’t limited to buying directly from a bank. Brokered CDs, purchased through a brokerage, can be sold on the secondary market before maturity instead of triggering an early withdrawal penalty. The price you get on that secondary sale moves with interest rates, and the broker charges a markup or markdown on the trade.

What You’ll Need to Open the Account

A bank has to confirm the business exists and that the person signing has authority to bind it. Expect to produce:

An Employer Identification Number from the IRS, which you can get online at no cost and use immediately.³
Formation documents: Articles of Incorporation for a corporation, an Operating Agreement for an LLC, or a Partnership Agreement for a partnership.²
A corporate resolution or authorization letter showing the board or members approved the person opening the account.
A copy of your state or local business license, if the bank asks.
A certificate of good standing from your secretary of state, which some banks require to confirm the entity is active.

Federal anti-money-laundering rules add one more step. Under the Customer Due Diligence rule, the bank must identify every individual who owns 25% or more of the entity, along with one person with significant management control such as a CEO, CFO, or managing member.⁴ This happens every time you open a new account, regardless of any changes to the separate FinCEN filing requirement.

Minimum Deposits and Funding

Minimums vary by institution. Some business CDs start as low as $1,000, while others set the floor at $10,000 or $25,000.¹ Jumbo CDs usually require $100,000 or more and tend to pay higher rates. Most banks let you apply online and fund the CD by wire or ACH pull from an existing business checking account; some still want a branch visit for a new relationship.

How FDIC Insurance Works for Business Accounts

Business deposits at an FDIC-insured bank are covered up to $250,000 per depositor, per institution.⁵ If your business banks with a credit union, the NCUA Share Insurance Fund provides the same $250,000 limit on share certificates.⁶

Coverage for the business is a separate ownership category from your personal deposits. An owner with $250,000 in a personal savings account and $250,000 in a corporate CD at the same bank has $500,000 insured in total.⁷

Here’s where businesses get tripped up. All deposits belonging to the same entity at one bank are added together for insurance, no matter how they’re labeled. A corporation with three CDs totaling $400,000 at one bank has only $250,000 insured, even if the CDs were opened by different divisions or earmarked for different purposes.⁸ The entity also has to be engaged in “independent activity,” meaning it exists for a real business purpose rather than as a shell to multiply coverage.⁷

Businesses with cash reserves above $250,000 can get full coverage without opening accounts at a dozen different banks on their own. Deposit placement networks such as IntraFi’s CDARS and ICS products split your deposit into sub-$250,000 pieces placed at other member banks, so every dollar stays insured while you deal with a single institution and one statement.⁹ Ask whether your bank participates before parking a large sum.

How the Interest Is Taxed

Interest on a business CD is taxable income. The bank reports it to you and to the IRS on Form 1099-INT if the interest totals $10 or more for the year, and you owe tax on the interest whether or not you receive the form.¹⁰

How you report it depends on the entity. A C-corporation includes the interest as business income on its corporate return. Pass-through entities (S-corporations, LLCs, partnerships) flow the interest through to owners, who report it on their individual returns. If the business uses cash accounting, you report interest in the year you receive it. Under accrual accounting, you report it as it accrues, even before the CD matures.

One nuisance to avoid: backup withholding. If the taxpayer identification number you give the bank is wrong, or the IRS tells the bank it doesn’t match, the bank must withhold 24% of your interest and send it to the IRS.¹¹ You get the money back as a credit when you file, but it ties up cash in the meantime. Double-check the EIN on your W-9 before handing it over.

Early Withdrawal Penalties and Auto-Renewal

A CD locks up your money for the term you agreed to, and pulling it out early costs you. Penalties at major banks commonly run from 60 to 365 days of interest, with longer terms carrying heavier penalties; a five-year CD at some institutions costs a full year of interest to break. Partial withdrawals, where allowed at all, draw the penalty on the amount taken out. Some banks don’t allow them and require you to close the whole CD.¹²

At maturity, most banks automatically roll the CD into a new one at the then-current rate unless you act during a short grace period. Bank of America, for example, uses a seven-day window.¹ Miss the window and your cash is locked in again. Put the maturity date on your calendar and decide ahead of time whether to withdraw, renew, or move the funds.

Common Ways Businesses Use CDs

Two patterns show up often enough to mention.

A CD ladder splits a deposit across several CDs with staggered maturities. Instead of a single $100,000 twelve-month CD, you might open four CDs maturing at three, six, nine, and twelve months. Each quarter, one matures and either frees up cash or rolls into a new twelve-month CD at the back of the ladder. You keep regular access to liquidity while capturing the higher rates that come with longer terms, and you can time maturities to seasons when expenses run high.

A business CD can also serve as collateral for a commercial loan or line of credit. CD-secured loans typically carry lower rates than unsecured ones because the lender’s risk drops. You sign a collateral pledge agreement, and usually a deposit account control agreement spelling out access rights. You can’t withdraw or close the pledged CD without the lender’s consent, and if it matures during the loan it generally auto-renews under the same pledge. The CD keeps earning interest while it backs the loan, so your effective borrowing cost is the loan rate net of what the CD pays.

1
Bank of America. Business Certificate of Deposit (CD) Accounts
2
U.S. Small Business Administration. Open a Business Bank Account
3
Internal Revenue Service. Employer Identification Number
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eCFR. 31 CFR 1010.230 – Beneficial Ownership Requirements for Legal Entity Customers
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Federal Deposit Insurance Corporation. Deposit Insurance At A Glance
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National Credit Union Administration. Share Insurance Coverage
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Federal Deposit Insurance Corporation. Corporation, Partnership and Unincorporated Association Accounts
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eCFR. 12 CFR 330.11 – Accounts of a Corporation, Partnership or Unincorporated Association
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IntraFi. ICS and CDARS
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Internal Revenue Service. Topic No. 403, Interest Received
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Internal Revenue Service. Publication 15 (2026), (Circular E), Employers Tax Guide
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Federal Reserve. Reserve Requirements