Do I need a business bank account?
Do you need to open a bank account for your small business? Find out here.
If you’re starting a small business, one of the biggest questions you have is probably, do I need a business bank account? The answer is that it’s a little complicated — whether or not you’re required to have an account depends on your business ownership structure.
In this guide, we’ll look at the types of businesses that need business bank accounts and run through the paperwork needed to open an account.
Do I need a business bank account?
Whether or not you need a business account depends on the structure of your business:
- Sole proprietorship: In some cases. If you operate your business under your own name, you can use a personal bank account. If you use a business name, you have to open a business bank account.
- Partnership: Yes, you need a business bank account. This will allow you to pool capital and share financial responsibilities with your partner(s).
- Corporation: Yes, you need a business bank account. If your company incorporates, it’s a legal requirement to have a business account.
But even if you’re not technically required to open a business bank account, there are several reasons why you should. Opening a business account makes it easier to track your spending, monitor cash flow and meet your reporting obligations come tax time.
A business bank account also boosts your business’ credibility, and will help you establish a business credit history — which will come in handy if you need to apply for a business loan or line of credit in the future.
Do I need a business bank account for a sole proprietorship in Canada?
As a sole proprietor, you’re not legally required to open a business bank account if you operate under your own name, so you can use your personal account for business transactions if you want. But if you use a business name, you’ll need to open a business bank account.
It’s also worth pointing out that some financial institutions require all sole proprietors to open a business account rather than use a personal account. For example, RBC requires sole proprietors operating under their own name to open a separate business account.
What do I need to open a business bank account as a sole proprietorship?
You’ll need to provide the following documents:
- Trade name registration
- Master business license
- Government-issued ID
However, you won’t need business registration documents if you operate in your own name. Learn more in our guide to opening a business bank account.
Do I need a self-employed bank account?
Not necessarily — but there are plenty of reasons why opening one is a good idea.
If you’re self-employed as a sole proprietor and you operate under your own name, you can use your personal account for business transactions if you want. However, if you use a business name, you’re required to open a separate business account.
Partnerships also generate self-employment income and benefit from a separate joint account where you can manage all of your business’ finances.
What do I need to open a business bank account while self-employed?
Sole proprietors will need to provide their master business license, trade name registration and government-issued photo ID.
If you run a partnership, you’ll also need your partnership agreement or registration, as well as business ownership details and proof of ID for all authorized account signatories.
Do I need a business bank account as a freelancer?
It’s possible to use a personal account for both your personal and business transactions as a freelancer. The main benefit of doing so is that you don’t need to go through the hassle of opening a second account, remembering an extra password and PIN, and potentially paying a monthly account fee.
But there are a lot of benefits to managing your personal and business finances in separate accounts. This makes bookkeeping a lot more straightforward, as it’s easier to track your cash flow and report all your income to the CRA. It’s all about streamlining your business money management, leaving you with more time to focus on your freelance work.
If you’re a freelancer working as a sole proprietor under your own name, you don’t have to open a business bank account. But once again, there are plenty of reasons why you should.
But if you’re an incorporated company, you’ll need to open a business account.
Related: Compare small business bank accounts
Compare business bank accounts
1 - 7 of 7
What is a business bank account?
A business bank account is a lot like your personal chequing account, except that it’s opened in your business’ name. You can use it to take care of all your day-to-day business banking transactions, like paying bills, sending and receiving transfers, writing cheques and paying for purchases.
Business bank accounts are widely available from the Big Six banks, credit unions and even some fintechs. Most business bank accounts from traditional banks come with a monthly fee — the fee will often be waived if you meet a minimum balance requirement — but there are some no-fee business accounts available.
What are the types of business bank accounts?
There are three main account types to choose from:
- Chequing accounts. Business chequing accounts are used to perform your day-to-day banking transactions, like receiving payments, paying suppliers and sending transfers. You’ll also get a linked debit card to pay for purchases and make ATM withdrawals. Many business bank accounts have a monthly fee, but the fee may be waived if you meet a minimum balance requirement.
- Savings accounts. Business savings accounts pay interest on the money you deposit, allowing you to put your unused cash to use. The best business savings accounts provide easy access to your money whenever you need, have no minimum balance requirement and also don’t have any monthly fees.
- Foreign currency accounts. If your business regularly transacts in a foreign currency, such as USD, this type of account lets you hold, send, spend and receive funds in your chosen currency. This helps you avoid foreign exchange costs and make faster payments in whatever currency your business requires.
What do I need to open a business account?
You’ll need to provide a valid, government-issued identity document to open a business bank account. Your driver’s licence or passport fits the bill. If you’re opening an account for a corporation or partnership, each director or partner will also be required to provide proof of ID.
You’ll then need to provide business registration documents, but the paperwork required varies depending on the structure of your business. You’ll need to check with your bank for a list of documents required, but you’ll generally need to provide the items listed below.
Sole proprietors
- Trade name registration
- Master business license
Corporations
- Articles of incorporation
- Certificate of business registration
- Trade name registration (if applicable)
- Canada Revenue Agency registration business number (if your organization solicits donations from the public)
Partnerships
- Partnership registration
- Partnership agreement
- Trade name registration or master business license
Associations
- Articles of association or your association’s original constitution and bylaws
Learn more in our full guide to requirements to opening a business bank account.
How do business accounts differ from personal accounts?
You can use a business bank account to perform many of the same transactions you make with a personal account. This includes deposits and withdrawals, paying bills, sending transfers and paying for purchases.
But there are also a few key differences. Business accounts are opened in the name of your business and can have multiple authorized users. They also offer features that can help you manage your business finances, such as the ability to receive unlimited credit card payments, manage payroll and make regular cash deposits.
Finally, business bank accounts also tend to have higher fees than personal accounts.
Pros and cons of getting a business bank account
Pros
- Keeps your personal and business finances separate, which makes things much easier at tax time
- Helps you track your spending and manage cash flow
- Makes your business appear more professional
- Builds your business’ credit history
- Accounts offer features that suit the transaction needs of your business
Cons
- Many business bank accounts come with a monthly fee
- If you want the monthly fee to be waived, you may need to meet a high minimum balance requirement
- Some accounts only support a limited number of monthly transactions
- Another PIN and password you need to remember
Bottom line
Regardless of whether or not you’re required by law to open a business bank account, there are lots of reasons why opening a separate account for your business makes sense. Compare business bank accounts that suit your transaction needs before deciding where to open an account.
Frequently asked questions about business bank account needs
More resources on Finder
More guides on Finder
-
Scotiabank Select Account for Business review
Your guide to account plans, transactions and monthly fees for the Scotiabank Select Account for Business.
-
Scotiabank Scotia Professional Plan Plus Account Review
Your guide to the transactions, fees, limits, and pros and cons of the Scotiabank Scotia Professional Plan Plus Account.
-
Methodology for business bank accounts
Here’s our methodology for scoring the features that matter, and picking the top business bank accounts in Canada.
-
RBC business banking guide: How to choose the right RBC business account
Learn more about RBC business banking services and how to find the right account for your business.
-
Tangerine Business Savings Account review
Learn about the rates, fees and eligibility criteria of the Tangerine Business Savings Account.
-
Best multi-currency cards in Canada
Your guide to the best multi-currency card in Canada and the pros and cons of using a multi-currency account.
-
Best free business bank accounts in Canada
Compare free business bank accounts in Canada and learn how to select the right account for your business needs.
-
How to open a business account in Canada
The five steps to opening a business account to manage your business finances.
-
Vault business banking review
A detailed review of the features, fees and eligibility criteria of the Vault business bank account.
-
15 best business bank accounts in Canada
Explore our top picks for the best business bank accounts in Canada.