Have there been any recent changes regarding the documentation and titling of a sole proprietorship account?

There have not been any changes in the law regarding sole proprietorships that we know of, but we note that this area of law is somewhat unclear because the federal law differs from Illinois law. For purposes of account titling and documentation, the federal IRS rule — allowing for married couples sole proprietorships — is likely the most relevant.

Federal law: Under the Internal Revenue Code, a married couple who run a business as together may file their joint tax return as a sole proprietorship if they fulfill all of the requirements to be considered a “qualified joint venture.” IRC Section 761(f)Election for Married Couples Unincorporated BusinessesFAQ on married couples sole proprietorships (December 6, 2017).

State law: Under Illinois law, any two or more individuals who run an unincorporated business together (that is, who “carry on as co-owners a business for profit”) are automatically considered a partnership, even without a written agreement or filing with the Secretary of State, and there is no exception to this rule for spouses. 805 ILCS 206/202(a). (However, note that the Illinois Department of Revenue’s business registration form (REG-1) does allow for a married couple business to register as a sole proprietorship for tax purposes.)

Account documentation

When documenting a new sole proprietorship account, the bank should follow its Customer Identification Program (CIP) procedures as it would with any other business entity. At a minimum, the bank should collect the sole proprietorship’s EIN. 31 CFR 1020.220(a)(2). A married couple sole proprietorship might not have a separate EIN; as stated in the Election for Married Couples Unincorporated Businesses webpage, the IRS does not require spouses to apply for an EIN for the sole proprietorship, provided that they fulfill all of the requirements for a “qualified joint venture.” (One of those requirements is that the couple file its tax returns jointly, and therefore the bank could use the EIN from their joint tax return as the sole proprietorship’s EIN.)

Of course, a bank may decide to require sole proprietorships to obtain separate EINs. A bank may also require other documentation before opening an account, such as the sole proprietorship’s tax return (Schedule C) or its assumed name certificate (if operating under a fictitious or “d/b/a” name).