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Husband & Wife Joint Sole Proprietorship Account
by David Dickinson, BOL Guru
Guru Bio
Question: We have a husband and wife who are farmers in our area that want to open sole proprietor deposit accounts to operate their farm. Can they open a joint account? They do not want the ownership limited to one person as they are equals. I don't see how this can be done within a sole proprietorship, but they say "they've always been able to do that." Can we do this?
Answer: This really comes down to state law and the definition of a "partnership". The FRB has issued the following pertaining to husband and wife sole proprietors:
A husband and wife operating a profit-making business as individuals, but not as a partnership or other financial business organization, may maintain a NOW account at a member bank, since it is impracticable to distinguish between funds that are used in their business and other funds of those individuals. [Federal Reserve Staff Opinion January 23, 1979]
A husband and wife partnership is not eligible to maintain a NOW account at a member bank. Eligibility for NOW accounts is established by 12 USC 1832(a), which authorizes institutions to offer NOW accounts. Paragraph (2) of that section specifically excludes for-profit partnerships. Although a husband-and-wife for-profit partnership cannot maintain a NOW account, a husband and wife are permitted to maintain a joint NOW account for their non partnership purposes. [Federal Reserve Staff Opinion October 16, 1986]
First published on BankersOnline.com 3/26/07
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