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#2237871 - 06/10/20 08:20 PM Do Sole Prop's need to provide a business license?
JB Offline
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What is your policy at your bank? Do sole proprietor's need to require a business license to open an account? Is there another form of business documentation allowable for them, or is just CIP on the individual enough?

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#2237873 - 06/10/20 08:28 PM Re: Do Sole Prop's need to provide a business license? JB
BrianC Offline
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The USA PATRIOT Act states that the bank must obtain sufficient information at account opening to form a reasonable belief that it identifies its customer. On the one hand, a sole proprietor is the same as the individual so there may or may not be additional information for identifying the business. (Some jurisdictions require that the owner file an assumed name certificate). Whether you an assumed name certificate or business license is based on your CIP risk assessment. However, consider issues beyond CIP.

If we do not obtain an assumed name certificate, we have no way of knowing if our customer has a legal right to use the trade name they are claiming to have right to. The “poster story” for failure to verify a trade name belongs to Fifth Third Bank, which allowed an employee of the city of Dixon IL to open an account in the name of the city without verifying that the employee had the authority to open such an account. The employee used this account to steal over $50 million from the city. The bank ultimately paid $3.85 million to the city as part of a legal settlement.

https://www.saukvalley.com/2013/05/10/bad-faith-shown-by-bank-in-crundwell-thefts/aqu68ju/?page=99

Particularly during the COVID-19 pandemic we have to be especially aware of fraud. FinCEN describes one such scam in their recent press release as an “imposter scam.”

https://www.fincen.gov/news/news-re...fincen-encourages-financial-institutions

Folks are setting up fake charities to collect funds to “help” families healthcare workers, etc. So if the bank allows me to set up an account as

Brian J. Crow
D/B/A The American Red Cross

and chooses not to verify that I never filed an assumed name certificate to use that name (because if I did, the Red Cross would block my application) the bank could be accused of not using “commercially reasonable standards” as Fifth Third was if I then steal lots of money from the Red Cross because I am able to deposit checks that should be going to the legitimate charity and use the funds for my personal gain.

Bottom line, there is more at stake here than CIP.
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#2237985 - 06/12/20 01:06 PM Re: Do Sole Prop's need to provide a business license? JB
edAudit Offline
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While Brian is correct, some sole proprietors do not need a assumed name certificate or a business license. These are Sole Prop's doing business in there own name and not an assumed name. A lot of these (but not all) are required to have licenses to practice even General Contractors doing business in their own personal name (at least in NY). I would obtain copies (of originals) of the business license.

If i am opening a Sole Prop. to do bank consulting under my own name (at least in NY) I would not need an assumed name certificate or a business license.
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#2251181 - 03/24/21 08:51 PM Re: Do Sole Prop's need to provide a business license? JB
Cbigun Offline
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This has become a real struggle with PPP loans and General Contractors etc. and setting up deposit accounts with which to pull their proceeds from. When it is a Sole Prop. in an individuals name, what do you use to "verify" they are actually a business? I'm coming in late to the game so feel as if I am behind.... the accounts are being set up as a business account using an individuals name only, Jane Rae Smith, not Jane Rae Smith DBA Jane Rae Smith. If the business is in their name, should it be noted as DBA? Are all businesses required to have some type of "business documentation" to PROVE they are an actual business, as noted above for fraud?

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#2251191 - 03/24/21 09:00 PM Re: Do Sole Prop's need to provide a business license? JB
BrianC Offline
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Business naming convention is based on state law. In Illinois, there is only a need to include an assumed name as a DBA if there is actually an assumed name. If my trade name is Brian Crow, there is no assumed name for me to register.
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#2251192 - 03/24/21 09:02 PM Re: Do Sole Prop's need to provide a business license? JB
John Burnett Offline
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If you operate a business under your own name, you aren't a DBA (doing business as). You are you and the account is in your name. "DBA account" is a misnomer. And no, as EdAudit said above, not all businesses have to have "business documentation."

I will say that if EdAudit has a business in his own name to provide consulting services, he would have to include a Schedule C in his annual tax return to report his business's income and costs and, I am confident, net income from that business activity.
Last edited by John Burnett; 03/24/21 09:03 PM. Reason: typo
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#2251193 - 03/24/21 09:09 PM Re: Do Sole Prop's need to provide a business license? JB
Cbigun Offline
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I understand..... just struggling on how to verify that they are actually a "business". We can't take a persons word on anything else for CIP - not even their address..... we have to have something to back it up, DL, bill etc. So how are we ok to take their word that they are a business. I'm a little lost on this one.

Thank you for your response though.

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#2251197 - 03/24/21 09:20 PM Re: Do Sole Prop's need to provide a business license? JB
John Burnett Offline
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Do they have a webpage for the business? Have they filed a schedule C for last year's taxes?
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#2251204 - 03/24/21 10:47 PM Re: Do Sole Prop's need to provide a business license? JB
rlcarey Offline
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Ask for the latest copy of their 1040 Schedule C for the business for a sole prop.
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#2251211 - 03/25/21 12:30 AM Re: Do Sole Prop's need to provide a business license? JB
edAudit Offline
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I am in agreeance on the Schedule C. In addition to the Schedule C, there may be State quarterly wage and/or unemployment insurance tax reporting forms.

Just kind of wondering if you can not verify that they are in fact a business, how can you verify payroll and/or eligible business expenses?

In NY (at least downstate) due to local ordinances General Contractors are required to have a "business license" but that will vary depending on your location.

Due to liability issues I would find it strange that a General Contractors would be formed as a Sole Proprietor in any state but it is possible.
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#2251215 - 03/25/21 12:02 PM Re: Do Sole Prop's need to provide a business license? JB
Cbigun Offline
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Thanks for all the input!

This helps. Like I said, I have not been involved in any of the PPP dealings and REALLY late to the game so getting my feet under me and have a lot of questions surrounding this.

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#2251219 - 03/25/21 12:42 PM Re: Do Sole Prop's need to provide a business license? edAudit
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Originally Posted by edAudit
I am in agreeance on the Schedule C. In addition to the Schedule C, there may be State quarterly wage and/or unemployment insurance tax reporting forms.

Depending on nature of the business and state law, there may also be quarterly sales tax reporting forms. Back in the dark ages, before I was a banker, I ran a handcrafted bath products business as a sole proprietorship. The sales tax requirement was the only state licensing requirement where I lived at the time as a sole prop. with relatively small sales.

You might ask about their liability insurance as well for proof they actually operate a business.
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