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#2216639 - 06/27/19 05:09 PM Concurrent Sole Proprietorship AND LLC/Corporation
Local_Banker Offline
Member
Joined: Jun 2019
Posts: 55
I have run into a few customers of late that have opened sole proprietorship accounts DBA their business name, who also have active legal entities in the same business name. They don't have the legal entity account at our bank, just the sole proprietorship.

For example:

Mike Smith has an account here for "Mike Smith DBA Mike's Donuts". And at the same time, "Mike's Donuts Inc." is an active legal entity in our state, but doesn't have an account here in that name.

I have instructed branch staff to tell the customers to choose one structure or the other, but have received some pushback. Is there any reason why this should be permitted? I can't think of a good reason for it, especially in the same exact name. It seems like they could be avoiding the beneficial ownership form, or trying to keep some income off the books.

I get that customers sometimes transition from one to the other, but the recent customers want to have it both ways. One even deposited a few checks made out to "Mike's Donuts Inc." to the sole proprietorship, which I instructed the branches to prohibit in the future.

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#2216646 - 06/27/19 06:18 PM Re: Concurrent Sole Proprietorship AND LLC/Corporation Local_Banker
RockChucker, CAMS Offline
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Joined: Jul 2013
Posts: 1,676
The Country
In my state if a Sole Prop wants to use a name that doesn't include the legal name of the proprietor (Joseph Smith) then they need to apply for an assumed business name (Smith Donuts). That has cleared up things that would otherwise fall in this category.
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#2216652 - 06/27/19 06:49 PM Re: Concurrent Sole Proprietorship AND LLC/Corporation Local_Banker
Local_Banker Offline
Member
Joined: Jun 2019
Posts: 55
In my state sole proprietors apply for DBA names at the local level (and the business certificates usually have a 5 year validity), whereas legal entities are set up at the state level (with annual filing). That is how they can run parallel entities with the same name.

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#2216675 - 06/27/19 08:24 PM Re: Concurrent Sole Proprietorship AND LLC/Corporation Local_Banker
TryingtoComply Offline
Diamond Poster
Joined: Apr 2013
Posts: 1,980
The West
Ditto. In our state, fictitious business names are established at the county level.

I would simply ASK the customer why they have the DBA and the corporate entity. There may be an explanation.

I would not do this: "I have instructed branch staff to tell the customers to choose one structure or the other, ………"

Once you have the information from the customer you can make a decision.

I agree that the corporate checks should not be allowed to be deposited to the DBA account.
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#2216720 - 06/28/19 02:54 PM Re: Concurrent Sole Proprietorship AND LLC/Corporation Local_Banker
Local_Banker Offline
Member
Joined: Jun 2019
Posts: 55
Thanks for the replies everyone. I just don't see any upside to the Bank in allowing such arrangements, and several downsides (including the above-mentioned improper check deposits). From the customer's perspective, I would think such an arrangement might diminish the liability protections of the corporate and LLC structures.

But in the future I may consider seeking out a reason for this structure, partially out of curiosity.

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#2217650 - 07/15/19 04:35 PM Re: Concurrent Sole Proprietorship AND LLC/Corporation Local_Banker
IronP2717 Offline
100 Club
Joined: Feb 2018
Posts: 133
Local,
I'm running into the same thing. All I know to do is re-enforce payee titles matching account title. If the account is set up as a sole prop, the items deposited must match the sole prop name or the assumed name.

If the check is payable to Jane Doe Inc., we won't accept into the sole prop account.

Here's another wrinkle. how do you handle the customer when they product sole prop docs that state Jane Doe DBA Jane Doe Inc.?

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