Running a business can be stressful, and that’s before you even begin to consider the financial side of things. After all, there are employees to manage, operations to handle, decisions to be made and, of course, finances to keep track of. If you’re still mixing your personal finances with your business finances, you probably know how confusing and scattered everything can be. This is precisely the reason why successful businesses always have their own bank account. With a business bank account, the business finances are contained and everything remains organized. To learn more about business bank accounts, why they’re beneficial, and how to choose and sign up for an account, continue reading below.
Are you using your personal credit card to make business-related purchases?
Why Should You Open A Business Bank Account?
Using a business bank account is mandatory in some circumstances and can be quite useful even when it isn’t mandatory. If your business is a separate legal entity, such as a corporation, you are required to open a business bank account that is individuated from your personal finances by law (learn how to incorporate your business). Let’s explore the other benefits of opening a business bank account.
Taxation
Having a separate business bank account will keep income and expenses separate from your personal finances. When the time comes to filing your business taxes, determining business income and expenses will become much easier. Taxes are already enough of a burden, make it as easy as possible for yourself
Management
A big part of operating a business is making decisions on financial information. If your personal finances are mixed into the business financial data, you won’t have the most accurate information available. Managing a business will be more simplistic with correct information produced from a business bank account.
Secureness
Your personal finances will be protected when they’re separated from the business’ assets. Furthermore, business banks often offer limited personal liability protection which helps protect your personal assets.
Small business vocabulary all business owners need to know.
Professionalism
Businesses that have their own bank account appear to be more legitimate in the eyes of others in the world of business. Lenders, vendors, customers, and employees will consider you to be more credible and professional.
Business Credit Score
Having a business bank account will help you build and establish your business credit score. Business credit health is important because vendors and lenders will assess it before proceeding to work with you.
Financing
When you have a business bank account, finding and securing financing becomes much easier. The reason behind this fact is lenders tend to require their borrowers to have a business bank account if they’re applying for a business loan. Depositing loaned funds for a business into a personal account can be a big red flag for lenders
Will your personal credit affect your business loan application?
Types Of Business Bank Accounts
If you’ve decided that a business bank account is right for you and your business, the next step is to find an account that works best for your needs. Of course, you don’t need to commit to just one, you might need multiple business bank accounts for various uses. There are three main types of business bank accounts, as listed below.
- Chequing. Meant for day to day banking use, such as depositing cheques from customers, accepting wire payments, paying employees, and paying suppliers.
- Savings. Do you have capital that your business doesn’t need right now or even in the near future? Putting the money into a savings account is a great way to earn interest on the funds until you need it.
- Merchant. If you offer debit and credit payment options to your customers (or are planning to), you’re required to have a merchant bank account to deposit the funds. The account comes into existence through an agreement between a business, a merchant bank, and a payment processor.
Thinking about applying for a business loan? Avoid these application mistakes.
How To Choose A Good Business Bank Account
In addition to business bank account types, you’ll also need to select a bank to work with. Each bank has its own requirements, restrictions, and regulations. The characteristics of the bank usually work in your favour or against your favour, it’s merely a matter of finding an account that suits your needs. Below are various factors to consider when researching business bank accounts.
Fees
Most business accounts will have some sort of fee attached to them. Below are the various fees to watch out for when looking for business bank accounts.
- Transaction fees (ie. per-transaction fees, ATM fees, wire transfer fees, transaction limits, etc.)
- Application fees
- Set-up fees
- Termination fees
- Minimum account balances fees
- Cross-border fees
- Monthly or annual account maintenance fees
Interest Rates
Interest rates are mostly applicable on savings accounts, but could potentially be offered on chequing accounts too. Naturally, the higher the interest rate is, the more you’ll earn on your idle money.
Learn how to deal with small business debt.
Internet & Physical Access
Most businesses do their daily banking online, finding a bank with an optimal and high functioning online presence is ideal. In addition, a bank that is close to your business and has conveniently located ATMs is favourable too.
Integration
Integration refers to two aspects: existing relationships with banks and accounting integration. If you open a business account with a bank you’re already familiar with, the transition will likely go a lot smoother. As for accounting, opting for a bank that can easily work with your accounting software and systems will help the transitionary period.
How to expand your business with new capital, learn more here.
Best Business Bank Accounts
- TD Unlimited Business Plan
- BMO Business Builder 1
- CIBC Unlimited Business Operating Account
- Scotiabank Basic Business Account
- RBC All Inclusive Account
- NBC 35 Transactions Package
| Monthly Fee | Minimum Balance Required to Waive Monthly Fee | Monthly Deposits | Monthly Transaction Limits | |
| TD Unlimited Business Plan | $125 | $65,000/monthly minimum balance | Unlimited deposits$25,000 in cash | Unlimited |
| BMO Business Builder 1 | $22.50 | – | 25 deposits$2,500 in cash | 35 |
| CIBC Unlimited Business Operating Account | $65 | $45,000/daily minimum balance | 100 cheque $15,000 in cash$1,000 in coin | Unlimited |
| Scotiabank Basic Business Account | 10.95 | $8,000/monthly minimum balance | – | 1 free transaction for every $1,500 in the account |
| RBC All Inclusive Account | $100 | $75,000/daily minimum balance | 100 paper $25,000 cash | Unlimited electronic transactions |
| NBC 35 Transactions Business Account Package | $26.99 | – | 20 cheques$3,000 in cash$500 in coin | 35 |
TD Unlimited Business Plan
TD has a range of business bank accounts that range from $5 to $125 a month. Depending on which plan you choose you can have as little as 5 deposits and transactions to an unlimited number of deposits and transactions per month. With the TD Unlimited Business Plan, you get unlimited transactions and deposits for a monthly fee of $125. On the upside, you can have your fees waived if you have a monthly balance of $65,000 or more.
BMO Business Builder 1
The BMO Business Builder 1 has an affordable monthly fee of $22.50 for 35 monthly transactions, 25 cheque deposits and $2,500 in cash per month. This is a great option for smaller businesses who are growing, as you are able to change your account plan for free when your banking needs change.
CIBC Unlimited Business Operating Account
The CIBC Unlimited Business Operating Account is a great option for businesses that make a lot of transactions. If you expect your transactions to increase this account is perfect as it provides unlimited transactions, deposits, and withdrawals for a steady fee of $65. While this fee is quite hefty in comparison to the other options, it does come with very fews limits. Moreover, if you have a minimum daily balance of $45,000, your fee will be waived.
Scotiabank Basic Business Account
Scotiabank Basic Business Account is one of the cheapest options available. It costs $10.95 a month and comes with 1 free transaction for every $1,500 in the account. If you keep a monthly balance of $8,000 a month, you can have your monthly fees waived. If you need more transactions or deposits, Scotiabank has a variety of business bank accounts that you can choose from.
RBC All Inclusive Account
The RBC All Inclusive account is a comprehensive solution to your banking needs. It includes unlimited electronic transactions for a flat fee of $100. If you have a minimum daily balance of $75,000, you can have your fee waived. Moreover, with the RBC All Inclusive account you’ll be able to deposit 100 cheques and $25,000 in cash.
NBC 35 Transactions Business Account Package
The NBC 35 Transaction Business Account Package includes a monthly limit of 35 transactions for $26.99 per month. With this account, you’ll also be able to deposit $3,000 in cash, 20 cheques and $500 in coins. Overall, it’s a great account to start with, however, if these don’t meet your needs exactly, National Bank of Canada has a total of six different business accounts that you can choose from. The accounts vary in the number of transactions, deposits, and withdrawals offered. The cheapest option they have is only $5.99 and the most expensive is $77.99.
Documents You Need To Open A Business Bank Account
Are you ready to open a business bank account? There’s one final step: preparing the documentation needed to open an account. The paperwork you need will depend on the type of business you have. The documents you need are listed below.
Personal Information
- Two valid pieces of government-issued identification, such as a passport, driver’s license, health card, birth certificate or Canadian permanent resident card
Business Information – Sole Proprietorships & Partnerships
- Original registration of business name (sole proprietorships)
- Original registration of partnership (partnerships)
- Business license or vendor permits
Business Information – All Corporations
- Articles of incorporation
- Latest filing with your incorporating jurisdiction, with a listing of directors
- Trade name registration
- Business license or vendor permits
Happy Businesses Have Bank Accounts
All in all, businesses that have their own bank account tend to be more organized, professional and legitimate. Registering for a business bank account is rather simple and quick, the longest part of the process will be selecting the bank and account you want. Open a business account today – your business will thank you.
