Can You Cash a Check Made to a Sole Proprietor?

Every state uses the Uniform Commercial Code as the basis for state banking laws, including rules about cashing checks. The UCC does not specifically address the legality of cashing checks made payable to a business. However, due to taxation and legal issues, banks typically do not cash such checks. In some instances, they make exceptions for checks to sole proprietors.

Business Entities

The Internal Revenue Service assigns tax identification numbers to business entities used for tax purposes in the same way that individuals use Social Security numbers. Banks do not cash checks payable to entities because of liability issues related to allowing one person to accept cash on behalf of the business without making the funds available to all related parties. Additionally, banks do not want to fall foul of IRS laws related to aiding tax evasion if business owners cash checks to avoid declaring income.

Social Security Numbers

Many sole proprietors use their personal Social Security numbers for their business even if they establish a fictitious business name. From a tax perspective, the owner and the business are the same. A bank teller cannot determine if a check was made payable to a sole proprietor as an individual or as a person doing business. Therefore, most banks cash checks payable to sole proprietors. However, if the payee line features the fictitious name of the business rather than the name of the actual individual, most banks will refuse to cash it.


Many banks have policies preventing tellers from cashing checks or allowing business owners to deposit checks with cash back. In some instances, bank employees make accommodations for business owners by allowing them to make the deposit and immediately withdraw funds form the account even though the deposit has not yet posted. This procedure leaves the bank at risk if the check bounces, but enables bank employees to maintain good relationships with established business customers.


Some sole proprietors cash checks to avoid depositing them into their accounts, which would increase their income and incur taxes. The IRS requires banks to complete currency transaction reports if anyone conducts cash transactions that total more than $10,000 within 24 hours. Additionally, bank employees must complete suspicious activity reports for amounts below $10,000 if they believe an individual arouses suspicion when conducting a transaction. Bank employees can complete SARs if they believe an individual intends to cash a check to avoid paying taxes.