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Proprietorship adds Colleague: What is Needed?
I am self-employed and run a small consulting business. It is a sole proprietorship, no formal registration. Usually I work on my own. Now, I have just received a contract which involves working with another person, under my business umbrella. I would like to open a separate bank account to receive the funds we will earn, a portion of which I will pass on to my colleague. What kind of documentation might a bank require? All I have to prove my status is my yearly tax return and my 401k account.
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 Assuming that you wish to remain a sole proprietorship, you may or may not need to have a business license. Often, a business license is required if a sole proprietor wishes to do business under an assumed or fictitious name. As a consultant, you may have found that using your own name actually worked to your benefit, and you may not have any reason to change that even if you are planning to work with someone else on a project.
Find out if your state or local municipality requires you to have a license to operate the business. If so, get that license. Then, if the other individual for the contract will be an employee, you will have to obtain an Employer ID Number from the IRS, so that you can pay the other person properly. If you use an accountant, he or she can help guide you in this preliminary work.
Once you have done all of the preliminary work you need, go to your bank to find out what its documentation requirements are. In fact, you may want to make this contact early, just so you aren't surprised just when you think you've got everything organized. You might put together some examples of invoices you've issued as evidence that you're operating a business, if a license isn't required.
Published on BankingQuestions.com 1/14/09
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