How to Set Up Sole Proprietor Accounts

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Question:

We have a potential new customer who does business as a scrap dealer (appliances etc.). He receives checks made out to the name of his business. Does he need to have an account titled with the business name or can the checks be deposited into an account in his name, since it is a sole proprietorship and does not have a federal tax ID for the business? How should sole owner accounts be set up?

Answer:

Sole proprietors' account should be carried in the name of the individual sole proprietor, and annotated with the "DBA" or tradestyle adopted by the proprietor. An account opened by Samuel Smith for his sole proprietorship business, Smith's Scrap Swap Shoppe, should be carried in the name of Samuel Smith, with "Smith's Scrap Swap Shoppe" in a "DBA" field. It would be appropriate to accept for deposit to such an account checks payable either to "Samuel Smith" or to "Smith's Scrap Swap Shoppe." A sole proprietor's account should also carry the sole proprietor's Social Security number rather than an IRS EIN.

First published on BankersOnline.com 9/3/12