Questioning the Eligibility of Our NOW Accounts

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Question:

In a Reg D audit, I found a few accounts whose eligibility I question. I am new to my position and have been told that an account listed as a PSC (Professional Services Corp.) is eligible for a NOW account under Individual Status. I just wanted to make sure that was correct. Also, will the Secretary of State site tell me under "Company Type" if it is a Sole Proprietor?

Answer:

I suggest you and whoever told you that PSCs qualify, review section 204.130 of Regulation D. That section is a codification of the Federal Reserve Board Staff's interpretation of the law authorizing ownership of NOW accounts.

No for-profit corporation, LLC, partnership, or LLP is permitted to own a NOW account. PSCs and PCs and other forms of corporations created under state laws are not exceptions to that rule.

As for whether a business will be labeled a sole proprietorship on a Secretary of State's site will depend on the state. Not all states require sole proprietorships to file with the state, and whether those that do have to file are labeled as such is up to the office that controls the filing and the website. You'll need to contact your state's filing office for details.

First published on BankersOnline.com 7/27/09