> ## Documentation Index
> Fetch the complete documentation index at: https://developer.tazapay.com/llms.txt
> Use this file to discover all available pages before exploring further.

# Entity Status & Purpose-of-Use Validation for OBO Payout Creation

**Release Type:** Enhancement · Breaking Change

<Warning>
  **Action Required**

  Starting August 2026, Create Payout will reject requests made **on behalf of (OBO)** an entity whose details are still in draft (not submitted), or whose `purpose_of_use` does not include `payout`. Before this rolls out, check the `approval_status` and `purpose_of_use` of every entity you use as an OBO party, and update your integration to handle the new rejection responses gracefully.
</Warning>

## Summary

Tazapay's On-Behalf-Of (OBO) payouts let a platform merchant move funds on behalf of an entity — a seller, agent, or partner it onboards. Until now, Create Payout did not check whether that entity's details had actually been submitted, or whether the entity was even meant to be used for payouts, before releasing funds on its behalf.

To close this gap, Create Payout now runs two checks on the entity before creating an OBO payout:

1. The entity's details must have been submitted — not still in draft.
2. The entity's `purpose_of_use` must explicitly include `payout`.

If either check fails, the payout is not created and the API returns an error explaining why.

## What Changed

### Entity Status Check

The entity's `approval_status` must be one of:

* `approved`
* `submitted`
* `requires_action`

These statuses all mean the entity's details have, at minimum, been submitted. An entity that's still in draft (details not yet submitted) can no longer be used as the OBO party for a payout.

### Purpose-of-Use Check

An entity's `purpose_of_use` determines what it can be used for: `payout` is required to create a payout on its behalf, `collect` to create a collection, and so on. The entity's `purpose_of_use` array must include `payout` to be used as the OBO party on a Create Payout call, even if its status otherwise qualifies.

## Affected Endpoints

* `POST /v3/payout` — when the request specifies an on-behalf-of entity.

## Compatibility

This is a **breaking change for OBO payout callers only**. Create Payout calls that do not act on behalf of an entity are unaffected. If you use OBO payouts today, requests for entities still in draft, or without `payout` in `purpose_of_use`, will start failing.

## Behavior

| Scenario                                                                                               | Result                      |
| ------------------------------------------------------------------------------------------------------ | --------------------------- |
| Entity status is `approved`, `submitted`, or `requires_action`, and `purpose_of_use` includes `payout` | Payout is created           |
| Entity is still in draft (details not submitted)                                                       | Payout creation is rejected |
| Entity status qualifies, but `purpose_of_use` does not include `payout`                                | Payout creation is rejected |

## Relevant Links

1. [Create Payout API Documentation](/api-reference/tazapay-api/create-payout)
2. [Entity API Documentation](/api-reference/tazapay-api/entity)
3. [Checkout on Behalf Of Integration Guide](/cards/checkout-on-behalf-of/checkout-on-behalf-of)