📅 2026 Update: Key Changes for Banks and Customers

Since the original article's publication, several important changes have taken place that affect banks and customers. These updates include new requirements for accounting practices and CPA licensure, along with details on business formation costs. The original article continues further down this page, providing a broader perspective on banks and their relationship with customers.

📊 Accrual Basis Accounting Requirement

Starting in tax year 2026, certain businesses must use the accrual method for federal tax purposes. This affects C corporations, partnerships with a C corporation as a partner, and tax shelters with average annual gross receipts exceeding $32 million. The accrual method records income when it is earned and expenses when they are incurred, regardless of the cash flow.

🗓️ CPA Licensure Changes in Minnesota

Beginning January 1, 2026, Minnesota has introduced multiple pathways for candidates to obtain their CPA license. This change offers greater flexibility for aspiring accountants and may help meet the demand for qualified professionals in the field.

💵 Business Formation Costs

The fees for forming a business entity, like an LLC or corporation, typically range from $50 to $300, varying by state. These costs are important for entrepreneurs considering starting a business and should be factored into their overall budget.

⏳ Processing Times for Business Formation

Processing times for business formation documents vary widely across states. Depending on the state and whether filing is done online or by mail, it can take anywhere from a few days to several weeks to finalize the formation of a business.

📌 Summary of Key Points

  • 📈 Accrual accounting required for larger businesses starting in 2026.
  • 🧑‍🎓 Minnesota offers new paths to CPA licensure in 2026.
  • 💰 Business formation fees generally range from $50 to $300.
  • ⏰ Processing times for business formation documents can take days to weeks.
  • 🏢 Understanding these changes helps businesses navigate the banking landscape better.

💡 Tips for Banks and Customers

Review the details of your own situation with your attorney. Understanding the nuances of banking and business law is crucial for success.

📋 Understand Business Structure Options

Choosing the right legal structure affects how your business is taxed and what liabilities you face. Common options include sole proprietorships, partnerships, LLCs, and corporations. Each structure has different implications for banking and finance.

🌐 Get an Employer Identification Number (EIN)

Most businesses need an EIN to identify themselves for tax purposes. This number is essential for opening a business bank account and filing taxes accurately.

📄 Complete Necessary Forms

Employers must ensure all employees fill out Form I-9 and Form W-4. These forms help with employment eligibility verification and tax withholding, making banking transactions smoother.

⏳ Report Changes Promptly

If there are any changes in the responsible party of a business, Form 8822-B must be completed and mailed within 60 days. Keeping your records updated is crucial for smooth banking operations.

🏢 Utilize Free Resources

The Small Business Administration (SBA) offers free counseling and resources for entrepreneurs. These can be valuable for understanding banking options and business formation.

📊 Stay Informed About Accounting Methods

For tax years starting in 2026, businesses with gross receipts over $32 million must switch to accrual accounting. Being aware of this requirement can help in planning financial strategies with banks.

🏆 Top Services Ranked by User Reviews (2026)

The services listed below are designed to assist with business formation and legal documentation, which are essential for banks and customers. The order is based on Trustpilot data as of October 2026. Remember, customer ratings can fluctuate, and unhappy customers often leave more reviews, which can affect overall scores.

🥇 1. LawDepot

LawDepot has been rated 4.0. It is known for creating legal documents, including estate planning and business formation documents. Some users report issues with document customization options, which may affect user experience when trying to tailor documents to specific needs.

🥈 2. ZenBusiness

ZenBusiness holds a strong rating of 4.8. It is recognized for its business formation services, registered agent services, and compliance solutions. However, some users mention occasional delays in processing times, which could impact timely business operations.

🥉 3. LegalZoom

LegalZoom has earned a rating of 4.6. It is known for its business formation services, estate planning, and intellectual property registration. Some reviewers have reported delays in customer support responses, which may hinder assistance during critical moments.

4️⃣ Bizee

Bizee has a rating of 4.8. This service is recognized for its business formation and compliance services, which are vital for new businesses. However, some users have noted occasional issues with the user interface, which may complicate the process for some individuals.

5️⃣ Rocket Lawyer

Rocket Lawyer averages 4.5. It is known for offering online legal services, document preparation, and legal advice. Some users find the subscription model less cost-effective for those who use the service infrequently, which might limit its appeal for occasional users.

🆓 Free Government and Nonprofit Help

The Small Business Administration (SBA) and IRS provide free resources to help new business owners understand their tax obligations and navigate the formation process. These services can be invaluable for entrepreneurs looking to start their businesses without incurring high costs.

🔎 Factors to Compare When Choosing Services

  • 🏢 Business formation options available.
  • 💸 Costs associated with services.
  • 📞 Quality of customer support.
  • ⏳ Processing times for document filings.
  • 📝 Range of legal documents offered.

❓ Frequently Asked Questions

❓ What is the accrual accounting method?

The accrual accounting method records income when earned and expenses when incurred, regardless of cash movement. This method is required for some businesses starting in 2026.

🏛️ How can I form an LLC?

To form an LLC, you typically need to file formation documents with your state and pay a filing fee, which ranges from $50 to $300. Each state has its own specific requirements, so it’s important to check local regulations.

🧾 What forms do employers need to complete for tax purposes?

Employers must have all employees complete Form I-9 for employment eligibility and Form W-4 for tax withholding. These forms ensure compliance with federal regulations.

🕒 How long does it take to process business formation documents?

Processing times for business formation documents vary by state and can take anywhere from a few days to several weeks. The method of filing, whether online or by mail, also affects the timeline.

📈 What are the benefits of using a registered agent?

A registered agent receives legal documents on behalf of the business and ensures compliance with state regulations. This service is often included in business formation packages.

📚 Where can I find free business resources?

The SBA and IRS provide free resources and counseling for new business owners. These resources can help entrepreneurs understand their obligations and get started on the right foot.

⚖️ Recent Court Cases Related to Business Law

Recent court rulings continue to shape the landscape of business law in relation to banking and customer interactions. These cases may influence how businesses operate and interact with financial institutions.

For more information, you can browse more rulings on the news page.

End of October 2026 Update





Banks are businesses, although they are a somewhat different form of business than most. Banks hold the same kind of duty and responsibility towards their customers as do other businesses, but then banks owe additional responsibilities to customers thanks to their status as sometime agents for their customers.

Customers, however, in turn, hold responsibility to banks. Customers must pay into their accounts in order to be able to order the bank to pay out of them, which also means that customers are held responsible for the checks which they deposit. The interdependent relationship of customers and banks, then, is nuanced and important to examine.


An Overview of Banks and Customers


Background

The relationship between banks and customers is complex. At first glance, the relationship would seem to be the same as exists in many other businesses in which the bank would be beholden to the customer. This is somewhat true, though banks have a different relationship to customers than do most businesses.

To a bank a customer is not simply a consumer whose rights should be protected in the act of consuming. To a bank, a customer is a principal who must be represented by the bank as the customer's agent. But banks can change their roles. Whereas most people might think of a bank in this role as an agent acting on behalf of the customer, banks can also assume the role of a creditor, in which they act as parties interested primarily in obtaining funds from debtors to settle debts.

In this role as creditors, banks are decidedly more focused on protecting themselves and not on serving customers. It is entirely possible that a bank might fill both roles with regard to a single customer as well, as the bank will be the agent protecting the customer's accounts and acting in the customer's interest with regard to those accounts, while also being the customer's creditor through a loan the customer may have taken out.

The relationship between these roles is complex, and understanding how each role comes into play is necessary for understanding how a bank fills those roles. For more information on the plurality of roles that a bank may play with regard to its customers, follow the link.



Creditor and Debtor

A debtor is a party that owes something, be it property or money, to a creditor due to a loan from that creditor. The relationship between creditor and debtor is a relationship between two inherently self-interested parties. The creditor is interested in ensuring that its loan is returned to it with whatever interest is due, while the debtor is interested in ensuring that its property is not taken unduly, that it can pay off the debt as it so chooses, or at least as it so chooses within the terms of the contract agreed upon for the original debt.

Any kind of law dealing with creditors and debtors, then, must balance the interests of the creditor against the interests of the debtor. Without law protecting debtors, creditors would be able to seize almost anything from debtors in order to pay off debts. Without law protecting creditors, debtors might be able to postpone their payments or otherwise avoid fulfilling their side of the contract.

The rules surrounding creditors and debtors, then, are designed to allow for the fair judgment on the repayment of debts, especially with regard to exactly what a creditor can claim from a debtor. A trial might give a creditor a lien against a property or asset of the debtor, thus allowing the creditor to seize that property in order to pay off the debt.

This creditor/debtor relationship matters significantly to the interactions between banks and their customers, as banks can give out loans to customers or can buy up the loans that consumers made with other companies. As such, banks often act in the creditor role. For more information on the relationship between creditors and debtors and exactly how each is protected under law, follow the link.



Agency and Contractual Relationship



Agency refers to a specific relationship between two parties, in which one party is the principal and one party is the agent. The agent is given authority by the principal to act on behalf of the principal with regard to a third party, whether that means making contracts or performing transactions.

The exact nature of any given instance of agency is defined by the contract that established this agency. An agent can have a different amount of power afforded to him, depending on exactly how the agent-principal relationship is established, and as such, might only be able to take certain actions on the behalf of his or her principal. The principal will be held liable and responsible for any actions the agent takes within the agent's allowed purview, while any actions that the agent takes outside of his or her allowed power will be left liable to the principal only.

One of the key elements in the relationship between any agent and principal is that the agent must be acting on the behalf of the principal in the principal's best interests. A bank, for example, acts as a payment agent on the behalf of its customers as it pays off the checks which they draw from accounts held by the bank.

As such, however, the bank must act in its customers' best interests. It cannot pay from the customers' accounts without their permission, nor can it give unauthorized parties access to the information available about a customer's account. To find out more about the relationship between an agent and a principal and how it is enforced under law, click the link. 



Incompetence or Death of Customer

The relationship between a bank and a customer may be complicated by unpredictable circumstances of life. The primary fashion in which this sort of complication might arise would be if the customer of a bank gets into an accident of some kind, and is either killed or rendered incompetent in some fashion. For example, a customer might get into a car accident and, as a result, be put into a coma or even a persistent vegetative state. In such an instance, the question arises as to exactly what duties the bank has towards the customer and the customer's account.

As each account is likely tied to a single customer, then if that customer meets such a fate, the bank would no longer be serving anyone as an agent with regard to that account. For the bank to then make payments from that account for drafts issued by the customer prior to the accident might seem wrong, as the bank might be acting without authority granted from the agent in such an instance.

The Uniform Commercial Code provides for such circumstances, however, by affording to the bank a certain amount of protection while it continues to pay off drafts made by the customer prior to the accident. The bank is protected greatly if it does not have knowledge of the customer's death or incompetency, as the bank cannot be held for wrongdoing if it is acting without such information, simply because the accident has happened recently.

Even if the bank is given such information, it is protected for a certain amount of time in order to fulfill payment on checks drawn from the account prior to the customer's death. For more information on how the incompetency or death of the customer would affect the bank in its duties, follow the link.



Stop Payment

A stop payment order is issued by a customer to a bank in order to prevent the bank from issuing payment from the customer's account for a given check. The stop payment order will sometimes cost some amount of money to issue, but is generally worth it, as a stop payment order is most often issued in situations in which failing to issue the order might result in the check being cashed illegitimately by an unintended party. If, for instance, a check is stolen or lost, then issuing a stop payment order on that check is necessary in order to prevent the check from being misused by the thief or by the finder of the check. 

A stop payment order is not automatically effective, however, as there are some requirements which the issuer of the order must fulfill. For example, the order must be filed with the bank with enough time for the bank to take action.

As unfortunate as it may be, if the check in question is lost outside of the bank and someone managed to pick it up and cash it at the same time that the drawer is issuing a stop payment order, then the bank cannot be held accountable for the check, as the order will not have been issued with enough time for the bank to take appropriate action. If, on the other hand, the order is issued properly with enough time and the bank still makes payment on the check in question, then the bank would be liable to repay the customer.

A stop payment order is not permanently effective, as it will expire in six months of the date of issuance, but it can be renewed, and other provisions of the Uniform Commercial Code would likely help to protect the drawer. To find out more about stop payment orders and how they are issued, click the link.



Forged Signature on Checks

One of the problems of the use of checks is fraud. Since most of the elements of a check used to validate that check are forms of signature, then forging those signatures would allow the forger to submit checks for payment when he or she would actually have no legal right to do so. This is an especially dangerous practice in cases where an individual has lost his or her checkbook. In such a case, a forger could begin writing checks and signing them with a forged signature, thereby making payments out of the victim's account.

The responsibilities of a bank towards customers with regard to such forgery cases are quite important. In general, the victim of a fraudulently drawn check will never be held liable for that check. It is the bank's responsibility to examine the check and notice whether or not it appears to bear a forgery. If the bank accepts the check, then the bank accepts liability for the check's forged nature. This means that if the bank does pay out of the account of the supposed drawer, then it would have to restore that amount to the drawer at a loss to itself.

The bank would, however, be able to sue the forger and seek restitution that way. Should the customer have knowledge that would alert the bank to the possibility of forged checks, then the customer has a responsibility to alert the bank as soon as possible.

The customer cannot be held accountable for not informing the bank in time to stop it from making a payment, but should the customer simply refuse to alert the bank until after the bank has issued payment on a forged check, then the customer might be held somewhat accountable, though not for the check itself. To find out more information about the liability of forged checks and where it lies, follow the link.

Forged Endorsements on Checks

Forged endorsements are slightly different than forged signatures in that a check with a forged signature would never have been legitimate. A check with a forged endorsement, on the other hand, is invalidated thanks to the forged endorsement, but it might otherwise appear to have been a legitimate check. The forged endorsement might not even be the endorsement of the initially intended payee. It could be the endorsement of a payee further along who forged an endorsement.

Regardless, however, the check would still be invalidated, and if it was paid, liability would fall on one of the involved parties. Like cases of forged drawers' signatures, however, liability does not generally fall on the drawer and it absolutely would not fall on the payee whose endorsement was forged.

If the drawee bank paid the check with a forged endorsement, then that bank would be liable to the account from which funds were drawn, but that bank might then in turn be able to pursue a case against the bank into which the forged check was deposited. This is because a bank accepting a check with a forged endorsement for deposit and then seeking payment from the drawer's bank would be making a warranty that it had a right to do so.

With such a forged check, however, the depository bank would have no such right and would, therefore, stand in violation of its warranty. The result is that the depository bank would likely be the liable party. Of course, the depository bank could still seek remuneration from the forger him or herself, as ultimately the forger is always the liable party. For more on forged endorsements on checks and how to determine liability or responsibility in such cases, click the link.