4 reasons to open a business bank account
A small business bank account helps set up your small business for success. Here's what it can do for you.
Why do you need a separate bank account for your company? Opening a business bank account is an important first step to establishing your small business.
1. Keep your personal and business transactions separate
If your company is incorporated, then you should handle all of its financial transactions through your business, especially those related to taxes.
This is the key reason for opening a small business bank account, separate from your personal accounts. A business account also allows signing authority from someone other than you, if required, while a personal account does not. And it avoids the commingling (mixing up) of personal and business transactions, something the Canada Revenue Agency frowns upon.
2. Start building a credit profile for your business
A small business bank account is the foundation for building your business credit so that you can apply for business credit cards, lines of credit, loans or mortgages in the business’s name, instead of in your own. Having a business bank account also helps keep your business’s interest charges and borrowing fees separate for bookkeeping and tax-filing purposes.
3. Present your business more professionally to clients, peers and suppliers
A business bank account lets others, such as your clients, competitors and suppliers, know you’re serious about your business. Opening a small business account means you can accept and deposit cheques payable to your business name, instead of asking clients to write a cheque to you personally. And it establishes a professional image with your suppliers, which may favourably impact the terms of your accounts with them.
4. Save time and money at tax time
When you use a business bank account for your professional transactions, it’s easier for others, such as your bookkeeper and accountant, to find the information they need. For example, your accountant will spend less time identifying business transactions to create financial statements at the end of year, instead of sorting through your personal account to identify relevant transactions.
At tax time, it’s also more efficient for your accounting firm to gather the business financial information they’ll need to file your taxes. And the time saved may also save money on your bookkeeping and accounting fees.
Build your small business’s reputation and credit, and help keep your business transactions and tax documents organized, by opening a business bank account today.
These tips are neither a comprehensive review of the subject matter, nor a substitute for professional tax advice. Be sure to consult with your tax advisor to confirm the suitability of any of these strategies for your personal situation.
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