My friend needs an account opened for a previous company to help him out with his current contract. It cannot be in his name so the current company can't accuse him of making money on top of his contract. The money would be deposited and then transferred to the person. Is it legal to receive money from a company I don't work for and then transfer it to someone else?

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    Yeah - sure - I'm going to bet that you've never actually met this "friend" and have only recently started chatting thru the internet. This is a scam. Don't fall for it. You will be left on the hook for whatever stolen money passes through this account with your name on it. – brhans Oct 9 '18 at 17:18
  • I'm in the United States. There won't be any of my money in the account but my name is on it and I don't want it to look like income that I didn't report. – Karen Oct 9 '18 at 17:24
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    The money your "frlend's previous company" deposits into your account will be stolen from someone else. When you pay this money over to your "friend", it's got your "fingerprints" all over it. You are the money launderer. You will get caught. Your "friend" and his accomplices will disappear. There is no "previous company". There is no "contract". – brhans Oct 9 '18 at 17:38
  • It's almost certainly just a scam. you, the "other person" and the person wanting you to do this will all be emailing from Jail. – Fattie Oct 9 '18 at 20:34

TL;DR: Do not do this.

It cannot be in his name so the current company can't accuse him of making money on top of his contract.

Your boss cannot just call your bank and ask what other accounts you have. They will not tell him. Your "friend" is lying to you.

Is it legal to receive money from a company I don't work for and then transfer it to someone else?

The only reasons to have money going through someone else's account are to evade taxes and to launder money. Both of those are illegal.

  • I think in this situation it's a bit more mundane. Probably the friend has a clause in his current contract that prevents him from doing work on the side or with competing organizations. This sounds like a way to try to be "clever" and get around the restrictive clause. – Eric Oct 19 '18 at 16:49
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    I doubt it, @Eric. If he does have such a clause (and in what jurisdiction would such a clause even be enforceable?), this does not get around it, nor does it hide it, as the other party is almost certainly not auditing his personal bank account. – Rupert Morrish Oct 20 '18 at 5:10
  • These clauses are pretty common. It tries to get around the clause by having the work be done, on paper, by a company that the person is not affiliated with. The reality is that he will do the work though and the company is just a shell to accept the money and transfer it to him. – Eric Oct 20 '18 at 12:48
  • @Eric, the fact remains that the poster is relying on the friend to report the income. If the friend does not report the income, then he/she is committing tax fraud and the poster just helped that friend launder money. – ShadoCat Oct 23 '18 at 17:19
  • @ShadoCat Yes, I agree with all this, but I think the intent is different than what is stated in the answer. The answer says that the primary reason for this transaction is tax evasion or money laundering, but I think the tax evasion / money laundering are side effects of this transaction. I think the primary reason for this transaction is to try to avoid the appearance of working on the side. This doesn't mean that the OP should do it, but it does mean that the OP's friend is not laundering drug money or something similar. – Eric Oct 23 '18 at 19:28

How long have you known this "friend"?

If it is a long term friend who you've known since childhood, it might be legit (or at least as legit as tax fraud can be). Otherwise, it is a scam.

Here are the ways it can be a scam:

  1. Laundering money 1: The money is stolen and they need a fall guy/cut out.
  2. Laundering money 2: They are trying to evade taxes. You just helped.
  3. Stealing your money: They make a fake deposit in your account and you forward that money to another account where it gets withdrawn. Then your bank realizes that the deposit is fake and tries to reverse the transfer you made. When that fails, they send you a letter from an attorney indicating how much money you owe the bank.

If, and only if it is a long term friend, here is how to protect yourself (applicable in the US):

  1. Start a business (a DBA and/or a business license may be required in your area; consult a local attorney). An LLC is even better to protect yourself from any debts that result from this mess.
  2. Open the account in the business's name.
  3. In person, get the friends Social Security Number (SSN) and make a photo copy of the social security card and their driver's license or other state issued ID.
  4. Hold the funds in the account for 90+ days before transferring them.
  5. At tax time, account for the funds in and the funds out, indicating the SSN to which the funds were paid.
  6. Have them pay, up front, in cash for all of your expenses.
  7. Inform them about the 6 steps above and watch them "find another friend."

The things this accomplishes:

  1. because you will run this as a real business.
  2. to make it clear that you are not commingling your funds
  3. prevents a friend you've never met from giving you someone else's ID or just fake info. It also counts as part of your due diligence for when things go pear shaped.
  4. Is to prevent you from being left holding the bag if the funds are fake or stolen as it gives enough time for the banks to figure things out.
  5. keeps you off the hook at tax time and properly reports the friend's tax obligation to the state and federal tax authorities.
  6. why should you pay?
  7. cockroaches scurry away from the light.

This is a lot of work and expense to protect yourself. It also gives you plenty of time to think about why in the world you would want to get involved in this mess in the first place.

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