Adding Sole Proprietorship

This document is intended to list the general requirements from a product and risk and compliance perspective needed to begin supporting sole proprietors in your existing Business onboarding and accounts program with Synctera.

Adding Sole Proprietorship to a Business Use Case

Product

If a user is using their account for commercial purposes, they are considered a Sole Proprietor. In this case they would be added as a person to the platform, using the Create Person API. Then they would add their business, with Create Business, and indicate that the structure is a sole_proprietorship, and leave EIN empty (unless the sole proprietorship has employees - see Risk and Compliance section). Then, the ownership of the business would have to be defined using the Relationship API (Beneficial Owner Of).

the verifications API will KYC the owner of the sole proprietorship, and this will count as the result of the KYB as well.

Risk and Compliance

If adding this use case as a net new request, please see our Change Management Process. You will need to follow the steps outlined and fill out the form to ensure the correct documentation is passed to and approved by your sponsor bank.

Commonly Asked Questions:

Is passing SSN, rather than EIN, acceptable for sole proprietor onboarding?

Yes - although if the sole proprietor has employees, an EIN will need to be provided. See this documentation for details: https://www.irs.gov/faqs/small-business-self-employed-other-business/form-ss-4-and-employer-identification-number-ein/form-ss-4-employer-identification-number-ein-1

What documentation do I need to provide to verify the sole proprietor’s identity in the event of a KYC review or failure?

This may vary depending on the results of the KYC run, the state the sole prop is operating in, and how the business is structured. In addition, whether or not the sole prop has a DBA or fictitious name filed or not will impact what documentation the sole prop has been legally required to file and hence what documentation is available for them to provide. You will need to become familiar with state laws and regulations when reaching out to a customer to obtain additional documentation. If you are using Ground Control, our team will provide you with assistance in determining what documentation is needed for a final decision on the KYC.

Can a Sole Proprietor open a consumer account?

While a Sole proprietor will be onboarded in most cases with an SSN and verification will occur on the KYC level, rather than the KYB level, it is required to open a business account, rather than a consumer account, since the individual is using the account for commercial purposes.

What needs to be changed from a policy, procedure, and disclosure perspective, if I am adding sole proprietors to my business use case?

You will not need to include any net new policies, procedures or disclosures when adding support for sole proprietors to your existing business program. Generally speaking, sole proprietorships carry similar risk to other businesses, but when adding a new feature we recommend re-reviewing your Risk Assessments to ensure they reflect any increased risk that may come with adding sole prop support.

Account agreements may need to be revisited to include language regarding any requirements from a general or state level for a sole proprietor to open an account.

This may vary depending on your use case, so please consult with the Synctera Risk and Compliance team if you have any questions about whether or not you should be updating your existing Risk Assessments or Account Agreements.