Just wondering how others handles check cashing for sole proprietor businesses. Our policy has been deposit the check and then write a check for cash. We don't allow cash back off the deposit. A sole proprietor account says, at other banks, cash back is not a problem.

If we know that they are a sole proprietor we will cash checks or give them cash back on a deposit.

The business owned by a true sole properietor is not a "separate entity" legally. I would allow checks to be cashed if status of business is confirmed to be sole proprietor (and therein lies the challenge). If the steps needed to make that confirmation are burdensome, just require the checks be deposited.

One reason to stick to a "deposit the check, write a check for cash" rule is so that your tellers have a single, simple rule to follow. They don't need to concern themselves about the status of a business as a sole proprietorship.

This is really all about establishing and managing customer expectations. Making clear (at the time an account is opened) your policy prohibiting the cashing of checks or the use of "cash back" for checks payable to businesses and training new tellers to adhere to such a policy (regardless of what they did at a prior bank) helps eliminate unrealistic expectations, customer arguments and non-productive time wasted at the teller window.

I completely agree with this. This has been the policy at most of the FIs I've worked for, for precisely that reason. We all know that sometimes the "status" of a business is not very clear. It is much cleaner to have a policy to deposit all checks payable to a business entity.

For what it's worth, one of the FIs I worked for used to allow for the checks to be cashed (as well as give cash-back on deposits) and ended up being involved in a lawsuit because of some improperly cashed checks. They changed their policy very quickly - business deposit tickets don't even have a "cash back" field anymore.

People will tell you all kinds of things "other banks" do for them to get you to deviate from your policy. Don't fall for it.