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KYB Requirements

Last Updated: 2025-12-28 Status: Complete

Quick Reference​

Purpose: Verify business entity legitimacy, legal structure, and authorized representatives

Key Verification Points:

  • Legal entity existence and good standing
  • Tax identification (EIN/TIN) validation
  • Business ownership structure
  • Authorized signers and decision-makers
  • Physical business presence

Primary Entity Types:

  • Sole Proprietorship / DBA
  • Limited Liability Company (LLC)
  • Corporation (C-Corp / S-Corp)
  • Partnership
  • Non-Profit Organization

Verification Sources: State Secretary of State offices, IRS, D&B, Experian Business, LexisNexis

Topics in This Section​

Explore the detailed KYB topics:

TopicDescription
Entity Types & DocumentationRequired documents for each business type (sole prop, LLC, corp, partnership, non-profit)
Verification MethodsEIN validation, Secretary of State checks, business credit, address and website verification
Implementation GuideSponsor bank requirements, approval timelines, manual review triggers, rejection handling
2025 Regulatory UpdatesFinCEN CTA exemption and CDD Rule status

Overview​

Know Your Business (KYB) is the process of verifying a business entity's legal existence, structure, ownership, and authorization to conduct payment processing activities. While KYC (Know Your Customer) focuses on individual identity verification, KYB validates the business itself.

Why KYB Matters​

For Payment Facilitators:

  • Regulatory Compliance: FinCEN Customer Due Diligence (CDD) Rule requires identifying and verifying beneficial owners
  • Risk Management: Prevents shell companies, fraud schemes, and money laundering operations
  • Sponsor Bank Requirements: Banks mandate comprehensive business verification before enabling payment processing
  • Network Rules: Visa and Mastercard require proper merchant identification and monitoring

For Merchants:

  • Establishes trust and credibility
  • Enables payment processing capabilities
  • Provides access to financial services
  • Protects against identity theft and fraud

KYB vs KYC​

AspectKYBKYC
SubjectBusiness entityIndividual person
DocumentsArticles, EIN, licensesGovernment ID, SSN
VerificationState records, IRSIdentity databases, credit bureaus
OwnershipUBOs, corporate structureN/A
ComplexityHigh (multi-layer entities)Low to moderate
TimelineHours to weeksMinutes to days
Key Difference

KYB verifies the business exists legally and identifies who controls it. KYC verifies individual identities. Both are required for complete merchant onboarding.

Key Terms​

Articles of Incorporation/Organization: Legal documents filed with the state to create a corporation or LLC, containing business name, purpose, registered agent, and initial directors/members.

Certificate of Good Standing: Official state document confirming a business is properly registered, current on filings and fees, and authorized to conduct business.

DBA (Doing Business As): Fictitious business name registration allowing a business to operate under a name different from its legal name.

EIN (Employer Identification Number): Federal tax ID issued by the IRS for business entities, similar to an SSN for individuals.

Operating Agreement: Internal LLC document outlining ownership percentages, management structure, and operating procedures (not filed with the state).

Corporate Bylaws: Internal rules governing corporation management and operations (not filed with the state).

Registered Agent: Person or entity designated to receive legal documents and official correspondence on behalf of a business.

Business License: Permit issued by local, state, or federal government authorizing specific business activities (industry-dependent).

Entity Verification Flow​

Self-Assessment Questions​

Q1: What are the key documents required for LLC merchant onboarding?

Click to see answer

Required Documents:

  1. Articles of Organization (Certificate of Formation) - Official state filing creating the LLC
  2. EIN Letter - IRS Form CP 575 or Form 147C
  3. Operating Agreement - Internal document showing ownership structure (required in some states)
  4. Certificate of Good Standing - Official state document confirming current status (should be <90 days old)
  5. Beneficial Owner Identification - Government ID and KYC for all 25%+ owners

See Entity Types & Documentation for full details.

Q2: How do you verify a business's EIN with the IRS?

Click to see answer

Three Primary Methods:

  1. IRS TIN Matching Program - Free via IRS e-Services, real-time verification
  2. IRS Form 147C Letter - Official IRS verification, available by phone/fax/mail
  3. Third-Party Services - Middesk, D&B, Tax1099 integrations

See Verification Methods for complete process.

Q3: What triggers manual review vs automated approval in KYB?

Click to see answer

Manual Review Triggers:

  • High-risk industries (gaming, CBD, crypto, adult)
  • Complex ownership structures (multi-layer LLCs, offshore entities)
  • Sanctions/watchlist screening hits
  • New business (<6 months) with high volume projections
  • Shell company indicators (virtual office, no website)
  • Data inconsistencies across documents

See Implementation Guide for detailed criteria.

References​

Government Sources:

Business Verification Services:

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