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Sole Prop Using Personal Joint for Business

What are your thoughts on a sole proprietor using a personal joint account for business transactions? Merchant deposits and payments are going in and out of the account (less than 15 transactions a month). We have insisted that our customer open a business account for his sole proprietorship. Is it wrong for us to require it?

Answer by Randy Carey: Totally a business decision for the bank. There is no right or wrong answer. But you most likely want to move it into a business account to eliminate all the consumer protections.


Answer by John Burnett:

As Randy suggests, it's a good idea to make sure that a sole proprietor operate his/her business through a business account, rather than a personal account, to ensure the owner of the account isn't provided with consumer protection disclosures (such as those for Regulation E). Another reason to run business transactions through a business account is to apply any SML monitoring appropriately. You could get lots of false alerts on business transactions in the personal account (15 merchant deposits and payments are likely to trigger alerts in a personal account), and you might end up ignoring even the alerts that you would pay attention to if the correct account type were being used.

And, of course, it's usually the case that business accounts are either analyzed for service charges or a higher level of service charges is applied to them than to a personal account. Allowing your customer to continue using a personal account could mean you're leaving income on the table.

First published on 10/06/2019

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