Topic: Sole Proprietorships
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Can a sole proprietorship account have a payable-on-death beneficiary?
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Yes, a sole proprietor may name a payable-on-death beneficiary for their account. The Illinois Trust and Payable on Death Account Act provides that accountholders may designate payable-on-death beneficiaries for “any account, deposit, certificate of deposit, withdrawable capital account or credit union share in any institution.” There is no exclusion for sole proprietorship accounts or other…
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When acquiring customers who have decided to move their account from another bank, what documentation should we require to open a sole proprietorship account for a customer “doing business as” an assumed name who started the business before assumed name certificates were required? Is using the business’s employer identification number (EIN) sufficient? What should we do if the customer wants to use their social security number for the account?
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When opening a new sole proprietorship account, we recommend following the guidance in FinCEN’s CIP Rule FAQs, which describe how to verify a sole proprietorship’s identity. Using a fictitious or assumed name certificate is one documentary method for verifying a sole proprietorship’s identity, but you may use non-documentary methods described in the CIP rules as…
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Is a sole proprietorship resolution required to open a sole proprietorship account?
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No, you are not required to obtain a sole proprietorship resolution to open a sole proprietorship account. When documenting a new sole proprietorship account, you should follow your Customer Identification Program (CIP) procedures. FinCEN’s CIP Rule guidance provides that when opening a sole proprietorship account, you may use the sole proprietorship’s fictitious or assumed name…
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In Illinois, can a married couple be the joint owners of a sole proprietorship? We have married customers who operate a construction business as a sole proprietorship and state they are the joint owners of the business. The couple files a joint tax return with one Schedule C form listing the business as “John Smith d/b/a Smith Construction.” The couple has a business checking account with our bank on which John Smith and Sally Smith both are listed as owners and authorized signers. When signing loan documents on behalf of the business, the couple each would like to sign as an owner, with “John Smith d/b/a Smith Construction” listed as the borrower. Is this allowable? Our core processor would not allow us to input “John Smith or Sally Smith d/b/a Smith Construction.”
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Yes, a married couple may be joint owners of a sole proprietorship in Illinois. However, since sole proprietorships are not separate legal entities apart from their owners, we recommend requiring John and Sally Smith to sign the loan documents in their individual capacity, subject to the caveats discussed below. Under the Internal Revenue Code, two…
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Our farmer customers who operate as sole proprietors open accounts using their social security numbers. If a farmer would like their spouse to be a co-owner on a farm account (e.g. John Doe or Jane Doe Farm Account), can the account still be classified as a sole proprietorship? In the past, we have allowed only one owner on a sole proprietorship account, with a spouse listed as an authorized signer. What is the proper way to title this type of account?
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We are not aware of any prohibition against a sole proprietor account being titled in the name of two spouses. Under the Internal Revenue Code, two spouses who run a business together may file a tax return as a sole proprietorship if they fulfill all the requirements for being considered a “qualified joint venture.” The…
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Can a sole proprietorship account list a payable-on-death (POD) beneficiary?
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Yes, Illinois law permits a sole proprietorship accountholder to name a payable-on-death beneficiary. Accountholders may designate payable-on-death beneficiaries for “any account, deposit, certificate of deposit, withdrawable capital account or credit union share in any institution.” There is no exclusion for sole proprietorship accounts or other business purpose accounts. For resources related to our guidance, please…
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An individual opened a personal checking account and a sole proprietor account. The personal checking account is overdrawn. Can our bank use the sole proprietor account to offset the overdrawn personal checking account?
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Yes, we believe that your bank may exercise a valid right of setoff with respect to the sole proprietor account. Under Illinois law, the right of setoff can arise either contractually (when a loan agreement or account agreement provides for a right of setoff) or under common law when there is “mutuality” of parties (the…
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We have a customer with a deposit account titled “XYZ Farms,” which is for his sole proprietorship. He also owns an incorporated trucking company. Can he deposit checks made out to the trucking corporation into his sole proprietorship account? He has not opened a bank account with us for the incorporated trucking company.
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Whether you could face liability for allowing your customer to deposit a check made payable to the trucking company into his sole proprietorship account if he had no authority to do so would depend on additional facts. Generally, under the Illinois Fiduciary Obligations Act (FOA), a bank will not incur liability when a customer it…
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Does Illinois law allow a sole proprietorship account to be titled in the name of two spouses? If so, are the spouses co-owners of the account? Can the sole proprietorship account list a payable-on-death (POD) beneficiary?
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We are not aware of any state law prohibition against a sole proprietor account being titled in the name of two spouses. Under the Internal Revenue Code, two spouses who run a business together may file a tax return as a sole proprietorship. The spouses will co-own the sole proprietorship account if they both sign…