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What is a Business Bank Account? Do I Need One? How Do I Open One?

Posted on 2014 07 02 by BetCrooks

I have several personal bank accounts; my money wafts like thistle seeds between a Canadian Big 5 bank, Tangerine and President’s Choice Financial. I have never really thought much about business bank accounts because although I have an ultra-small business as a Sole Proprietor, I don’t have an incorporated business. When writing up some of the features of the Tangerine Business Savings Account, though, I started wondering why people need business bank accounts and how they differ from personal accounts.

What Makes a Bank Account a “Business” Account?

      • A business bank account is set up in the name of the business. Sometimes that name is the same as the owner’s name but often it is a distinct unique name.
      • The cheques for the business bank account will have the business’ name and address printed on them.
      • Most business bank accounts charge higher fees than personal bank accounts; the justification is partly that business accounts often have many more transactions per month than personal accounts.
      • A business account can be transferred to the new owner if a business is sold; the money in the account generally belongs with the business.
      • The persons with signing authority on the account can be changed; For example, a new employee can be added as a person who can write cheques for the business. A former employee can be removed from the account.
      • According to the Guardian in Britain, you are more likely to deal with a business banking manager if you have a business account. This manager may understand and provide business advice to improve your cash flow.

Do I Legally Need a Business Bank Account?

In Canada, if I have understood what I’ve read, if your business is a corporation you need a business bank account. It’s also sensible. By incorporating, you are trying to ensure your personal assets are not at risk if the business fails. Having your personal money in the corporate bank account puts it at risk.

In Australia, according to the business.gov.au website if your business operates as a company or trust then it must have a separate bank account; Sole traders or partnerships are not legally required to have a business account.

Does Every Business Have a Business Bank Account?

I suspect many micro businesses don’t have a separate business bank account. For instance, I don’t. (Yes, I know anecdotal evidence is not scientific proof.)

I do have one personal bank account, though, that I only use for income earned from and expenses paid for my business. Why? Because accountants who manage the paperwork and taxes for larger businesses tell me it’s a good idea. It makes it much easier to show the CRA clearly what money was coming in, from where, and what was going out, and to where.

Several websites state that having a business bank account adds credibility to your business. I think that depends on how often you are paying customers or other businesses by cheque. Without that cheque how would your customers or colleagues know what type of bank account you have?

What Information Do You Need to Open a Business Bank Account?

As for any bank account, you will need

  • personal id proving your name and address
  • you may need a piece of government-issued photo id such as a driver’s licence
  • your business’ name and address
  • your business’ registration number, if applicable

RBC provides detailed lists at http://www.rbcroyalbank.com/business/accounts/how-to-open-account.html of the additional information required to open accounts. The documents required vary depending on whether the business is a

  • Sole proprietorship
  • Corporation
  • Partnership
  • Association; or
  • Condo corporation.

The list can be quite long. For example, for a Corporation the list might include everything from personal id for the substantive owners and those with signing authority right down to a health and safety certificate or a liquor license!

Where’s the Best (or Cheapest) Place to Open a Business Bank Account?

This is extremely difficult to answer. Some businesses deal with receiving and sending dozens or more cheques a day. Others receive one cheque every 6 months. Some businesses have to make frequent deposits of cash and coins. Others never do.

Banks, Credit Unions and Trust Companies also like changing their products frequently. Their quality of customer service can also vary greatly from branch to branch.

It’s worth taking some time and phoning around and using an internet search engine to find current recommendations, preferably from people working in the same area as your business.

I’ll try to research this topic further and add a new article based on what I find out. In the meantime, if you think you’ve found a great business bank account, please share where and the type with a comment.

Related Reading

  • What kinds of Business Bank Accounts Does Tangerine Offer?
  • Comparing the Interest Rate for a Business Savings Account at Tangerine versus the Big Banks

Join In
Do you run a business? Which financial institution has the honour of guarding your funds? Please share your views with a comment.

Posted in Finances, Money Tips | Tagged banks, business, business account, business savings account, small business

What Kinds of Business Bank Accounts Does Tangerine Offer?

Posted on 2014 06 30 by BetCrooks

Recently, my husband opened a Tangerine Chequing account. While doing so, we noticed that Tangerine now also offers a Business bank account which I decided to investigate.

Does Tangerine.ca Have a Business Chequing Account?

No.

Unfortunately at the time this is being written at the end of April 2017 June 2014, Tangerine does not offer a business chequing account. That’s unfortunate because a no-fee chequing account would be a boon to many small businesses.

Tangerine only offers a Business Savings Account at this time.

What Is the Tangerine Business Savings Account Intended to Do?

It’s intended to be a place to park surplus cash to earn interest.

According to the Tangerine website: “The Tangerine Business Savings Account is not intended to be used as an operating account and is not intended to provide general cheque clearing or currency trading services for your business.”

In case you’re curious, funds can only be transferred between this business savings account and another business account with the same ownership details. Tangerine won’t transfer money from this business account to the personal account of an authorized account holder, nor to another non-business account.

In other words, the money has to come in from and go out to your Canadian business chequing account elsewhere.

Can I Deposit Cheques or Cash into a Tangerine Business Savings Account?

You cannot deposit cash directly into the account. You do not get a ABM card with this account. You would have to deposit it elsewhere and then move the money into the Business Savings Account.

The Tangerine website didn’t seem to make it clear, however, whether you could deposit cheques into the account.

So I wrote Tangerine and asked:
Can I deposit cheques? And, if so,

  • Can I use the Cheque-In app? or
  • Can I use an ABM? or
  • Can I mail in a cheque for deposit?

They replied that:

  • You cannot use an ABM with a Business Savings Account and you will not get a bank card.
  • You cannot use the Cheque-In app to deposit cheques.
  • You can mail at cheque to Tangerine, at your own expense, to deposit into the account. You  need to write your Client Number and bank Account Number on the front of the cheque.

However, since their terms clearly state that the account is not intended “provide general cheque clearing” I think if you tried to mail in very many cheques they would close your account.

Since the cost to mail a cheque would be about 96 cents just for the stamp, it’s probably not going to save much money compared to cashing a cheque in a Business Chequing
Account anyway.

How Many People Can Have Access to my Tangerine Business Savings Account?

The Tangerine website says you can have up to 3 people with access to the account.

What Do You Need to Open a Business Savings Account at Tangerine?

I was surprised to read this on the Tangerine site:
“As a means of identity confirmation, each Authorized Individual must submit a personal pre-printed cheque made payable to the Business, drawn from a personal account belonging to the Authorized Individual and held at a Canadian financial institution.”

So you have to link your Tangerine Business Savings account to a personal chequing account, even though you cannot transfer money back out to a personal chequing account from the Business Savings Account!

You will also need

  • a cheque written on your business chequing account
  • the full registered address of your business
  • full addresses, phone numbers, email addresses and dates of birth for all people (up to 3) who are authorized to use the account

The application form says them may contact you to require further documents. Since I don’t have any way to actually open a new business account, I can’t check what these documents may be.

Things I Didn’t Expect about the Tangerine Savings Account

I didn’t expect you’d need to link it to all users personal chequing accounts, not just an external business chequing account for which they have signing authority.

Did I Open a Tangerine Business Savings Account?

No.

At this point, having only an ultra-small sole proprietorship business I wouldn’t really use a Business Savings Account.

If my business ever grows to a multi-million dollar enterprise, however, I might re-visit my decision. : )

Related Reading

  • Comparing the Interest Rate for a Business Savings Account at Tangerine versus the Big Banks

Join In
Do you have a separate Business Savings Account? Does your bank or credit union offer you a good interest rate? Please share your experiences with a comment.
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Posted in Finances, Money Tips | Tagged business, business account, business savings account, cash, ING Direct, savings, Tangerine

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