How to Open a Business Account in Canada

Have you heard of the saying “execution is more important than planning”? Well, it’s a saying that rings true with most entrepreneurs. It’s the idea that a grade A plan that is carried out poorly will never succeed the way a mediocre plan will succeed if executed well. So, when you’re executing your business strategy, opening a business bank account should be on the top of your to-do list. It’s an essential step that every business needs to make on their path to success. 

Why Should You Open a Business Bank Account

Whether you’re operating a sole proprietorship, partnership, or corporation opening a business bank account is important for a number of reasons. 

  • It allows you to keep your personal and business income separate. This is incredibly important when you have to report your business’s income for a tax return.
  • It allows you to track and keep a record of your business activity. Being able to manage your business’s finances through one place will help you manage your bills, debt, and cash flow.
  • Without a business bank account, you’ll be forced to accept payments via cash or cheque. Having a business bank account will allow you to process debit and credit card payments from your customers, which is crucial in today’s almost cash-free world.
  • It will build your credibility and credit score. Not only will a bank account make your business look more professional to clients and lenders, but it will also build your business credit score, which you can learn how to check here

What Documents Do I Need To Open An Account? 

Opening a business bank account in Canada is a fairly easy process that is typically separated into two parts. First, you’ll submit an application online where you provide information that can confirm your business’s identity, background, and financial situation. Second, you’ll set up an in-person appointment with the bank, where you will further discuss your business details. Depending on the structure of your business you’ll require a different set of documents to present. In addition to the documents, all business owners will be required to present two forms of government-approved photo ID. 

Sole Proprietorship

  • Trade name registration certificate or 
  • A copy of your Master Business License 

Partnership or Limited Partnership

  • Registered Declaration of Partnership or Partnership Agreement (where Provincial Law does not require registration)  
  • Trade name registration, if applicable  
  • Name, address, and occupation of all individuals having an interest of 25% or more in your business 

Thinking of incorporating your business? Click here to learn how.  

Corporation

  • Articles of Incorporation/Association 
  • Trade name registration, if applicable  
  • Name, address, and occupation of all individuals having an interest of 25% or more in your business 
  • Canada Revenue Agency registration number  – only if you collect donations from the public.

Can I open a Business Bank Account Online? 

Depending on the bank you choose and the type of business account you want, you may be able to open one with just an online application. However, most require an in-person meeting with a bank representative.

What Kind Of Business Bank Account Should I Open? 

There are three types of business bank accounts you can choose from:

  • Business checking account
  • Business savings account
  • Merchant services account

It is unlikely you will need to open all of these accounts when you start. If you’re fairly new to the game and don’t have any surplus in revenue, a business checking account is all you’ll need for now. It will allow you to manage your cash flow and send and receive any payments needed.

As your company matures and you’re racking in more cash, you can open up a business savings account. 

A Merchant services account allows you to accept debits and credits from your customers, which as aforementioned is an incredibly important factor when consumers are looking to purchase a product or service. However, you can only open this account after you have a business chequing account.

Best Banks to Open a Business Account With

Most of the major banks in Canada offer a multitude of different business account packages that will cater to your needs. Whether you’re just starting out or you’re in a growth phase you can choose from basic packages to all-inclusive ones. Depending on the package and bank, you’ll also be able to choose based on fees, interest and banking features. 

Putting Your Business Into Motion

No matter what type of business you are running, each one comes with its challenges. From building credibility to determining your marketing needs to managing your finances, there will always be an array of tasks you’ll have to tackle to become successful. Knowing why and how to open a bank account will take off a great deal of stress when it comes to the management of your company’s finances.

By Caitlin Wood
In partnership with Loans Canada