What makes sole proprietors so tricky to onboard—and why are they worth the effort? In this month’s BEV Break, Middesk CTO and co-founder Kurt Ruppel broke down the complexities of verifying sole proprietors (sole props) and shared how businesses can evolve their onboarding strategies to better serve this rapidly growing segment.
Here’s a recap of the key takeaways and tactics for navigating the gray areas of sole prop onboarding:
What exactly is a sole proprietor?
A sole proprietor is an individual who runs an unincorporated business. There’s no legal separation between the person and the business—meaning the owner reports income and expenses on their personal tax return and holds full personal liability. It’s a business structure that’s intentionally simple: no formal registration required in many cases, no separation of assets, and often no Employer Identification Number (EIN).
But that simplicity introduces complexity for those trying to verify the business. Sole props are everywhere—spanning industries like personal services, ecommerce, transportation, and consulting — and their lack of formal structure means they often fall through the cracks in traditional verification systems.
📽️ Watch Kurt break down why sole props are legally unique — and operationally complex.
What makes sole props challenging, but worth the effort?
Sole props sit in a gray zone between personal identity and business legitimacy. Most risk and compliance teams are set up to handle individuals (KYC) or corporations (KYB), but sole props? They blur the line. That creates real operational challenges, particularly for businesses that rely on structured data sources like Secretary of State filings.
Many sole proprietors aren’t required to file at the state level. Some use their SSNs instead of EINs. Others operate under fictitious business names or local registrations. There’s no single source of truth. That’s what makes verifying them tough—and why getting it right can give your business a major competitive advantage.
📽️ Hear why Kurt thinks of sole prop onboarding as part risk puzzle, part art form.
Why verifying sole props takes more than one data source
Verifying a sole prop isn’t about checking a single data source—it’s about building a complete picture using both authoritative and alternative signals.
Authoritative data might include fictitious name filings, state licenses, or sales tax registrations. But when that’s missing or incomplete, alternative data becomes essential. Things like website presence, domain history, online reviews, and even social profiles can help determine if the business is real, active, and trustworthy.
This multi-layered approach gives risk teams a more complete lens into who the sole proprietor is—and how their business operates.
📽️ Learn how domain age and web presence can reveal hidden risk signals.
Steps to improve sole prop verification
Verifying sole proprietors can feel more like an art than a science — but beneath that art is often a repeatable procedure. In this session, Kurt emphasized that improving sole prop evaluation doesn’t always require reinvention. It starts with understanding your existing workflows: how you manage compliance, assess risk, and decide when to go deeper.
Here are some of the areas he highlighted:
Understand your internal process.
Improving verification starts with clarity on what your role is in the process. Are you screening for compliance? Fraud? Creditworthiness? Different goals may require different signals or review layers.
Integrate external signals.
Beyond structured data like Secretary of State filings, bring in additional signals — like business websites, licensing records, or domain intel — to expand the decision space. This is especially important for sole props who may not be registered with the state.
Expand verification where needed.
For deeper checks, consider tools like phone and email verification. These lightweight steps can help detect fraud or increase confidence in the legitimacy of the business.
Support growth by meeting sole props where they are.
Not every sole proprietor will look like a “traditional” business, but that doesn’t mean they aren’t legitimate or ready to grow. Think of sole props as a starting point. With the right verification approach, you can help guide them toward formal business structures over time.
Expect continued growth.
While Kurt stopped short of making predictions, he noted that the trend line isn’t slowing down. Entrepreneurship is easier than ever, and sole props are often the first step. New job types will emerge, just like the gig economy did over the past decade, and your onboarding approach needs to evolve along with them.
📽️ Watch the clip where Kurt explains how thoughtful procedures, not just gut feel, can strengthen sole prop onboarding and power long-term growth.
Final thoughts
Onboarding sole props means looking beyond traditional playbooks and embracing more dynamic, data-rich workflows. The most successful teams aren’t just vetting people or paperwork, they’re modeling businesses.
A modern approach to sole prop onboarding includes:
- Layering authoritative and alternative data sources
- Continuously monitoring business relationships
- Adapting workflows to handle the unique complexity of sole props
Want to keep learning?
Join us next month when we shares how to protect against shelf and shell companies, two fast-rising fraud threats. More info can be found here.
