Congratulations! You started a business. You have a great team of employees, a sweet office building, and a comprehensive business plan. Now it’s time to start doing business and making money. One of the first things you need to do is open a bank account for your business.
There are a variety of reasons for this. Most importantly, it makes doing your taxes a lot easier. Tracking your income and expenses from one account makes filing your business taxes a breeze as opposed to mixing your personal and business finances.
Also, if you accept payments through a point-of-sale system as most businesses do, you will need a business account for these funds to go through. There are also a ton of advantages that having an account for your business will create for you, as we’ll outline later.
Fortunately, Canada has some of the world’s most reliable banks that make opening a business account easier for you. Below, we’ve listed all the information that you need to know to open a bank account for your business.
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Before You Start
Before you begin the process of setting up your business banking account, here are some things you will need on hand.
First, you must have two valid forms of government-issued ID. These include passports, driver’s licenses, health insurance cards, birth certificates, or military ID cards. It’s important to note that all banks have their own requirements, so be sure to double-check any policies offered by the bank of your choosing.
Keep in mind that these documents are required for corporations. If you are a sole proprietor or partnership, there are additional documents that you will need.
Once you have all your documents in order, the process of opening an account does not take long and can typically be accomplished in one sitting.
An interesting note is that it is not required of you to be a Canadian citizen to open a business account in Canada; nor do you have to be planning to move here. A lot of business owners open offshore accounts (the legal way) to take advantage of lower tax rates. However, this isn’t all that common in Canada.
Where to Open a Business Account
There are several places you can open a business banking account. In fact, all major banks in the country—such as BMO, CIBC, and Scotiabank—allow you to open a business account.
As we mentioned above, each bank has its own policy. Some banks may want you to make an appointment with a financial advisor at their branch to open an account. This is to learn more about your business and inform you of all the benefits you can receive.
When looking for the right bank for you, you should research the rates and fees each bank charges. Some banks will charge you a monthly maintenance fee if you don’t have their minimum required balance in your account. Others have high transaction fees, which is not good for businesses that make several transactions per day, such as a retail or convenience store.
Most banks will charge high fees for international transactions. If you own a company that does a lot of business overseas, this is something you will want to keep in mind, as there are independent services that offer generous foreign exchange rates for international transactions.
Benefits of Opening a Bank Account for Business
We’ve talked about how a business chequing account greatly helps your tax management at the end of the year. Now let’s get into some of the additional benefits your business will gain when opening an account
The primary benefit of having a business account is credibility. Unless you’re a fully online business, you don’t want to tell your customers to send you money through PayPal or Venmo. While those companies now do offer business services, it still comes across as a bit unprofessional.
Similarly, if you are accepting a cheque from a customer, you want them to be able to make the cheque out to your business name, not your personal chequing account. Similarly, when sending payments to suppliers or clients, you don’t want them coming from a personal account. In some business models, suppliers are the lifeblood of their business. Therefore, business owners want to appear as professional as possible if they want to retain those working relationships.
The world is digital nowadays, and that applies to payment processing as well. Without a business bank account, you will only be able to accept cash and cheque transactions. Having a business account opens up a ton of additional income streams. Today, data analysis is all the rage as top tech companies take on the latest start-ups offering data tools. Having an electronic payment processor gives you more info about your customers than if they simply paid in cash.
Another great benefit that business accounts provide is the ability to apply for business loans as well as lines of credit and cash advances. For a business just starting, this is crucial. Many operations rely on business loans to get them through the first couple of years while they build their customer base and start seeing sizable profits.
This allows your business to build credit, opening you up to bigger loan opportunities. This will also slash the interest rates of future loans and make you more credible to suppliers.
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A: Some banks will let you complete the entire process of opening an account on their website. Others will want you to come in to learn more about your company and what you’re looking to get out of a business account. The online account opening process is typically very fast, with some banks offering 60-second turnarounds.
A: Yes. Most Canadian banks will allow you to transfer a chequing account from another country. There may be certain fees and restrictions, however, so be sure to check with your local bank to learn more. These transfers are typically seamless with a worldwide bank chain such as TD Bank.
A: Yes. Most banks’ chequing accounts are FDIC-insured.
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To get a free quote for a group insurance plan for your company, you can fill out our contact form or give us a call during business hours at 1-877-600-5666.