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.