Do I open a USD bank account or a CAD one?

April 7, 2009 5:45 PM

I'm opening a new sole proprietorship in Canada that will be dealing with Americans and American companies. Should I open a USD bank account, or a Canadian one?

Theoretically, the answer is easy: USD. But, so far as I can consider, my actual transactions won't be to or from that account. My income will be through a merchant account (which WILL be in USD) and my expenses will be paid via credit card (personal, CAD card to start with, business USD card in time).

I'm really new to this and I can't even really think of many pros or cons for either choice. I guess having a CAD account will make taxes easier? Maybe? Help!

posted by Imperfect to work & money (8 comments total)

Virtually every financial institution will take a few points when they are converting currency, so you want to do the minimum number of possible currency conversions and structure your accounts accordingly...

For personal banking I have a CAD and USD account, other than the conversion issue I mentioned above, the only disadvantage to having both is paying the extra service charges for having an addiitonal account.
posted by Deep Dish at 5:53 PM on April 7

Do you mean opening an account in USD with a US bank or a USD account at a Canadian bank? If you have a bank account in the US and you're a Canadian there may be issues with withholding, primarily of interest income, which won't be a big deal, but you might want to investigate other potential withholding issues.

If you'll be travelling in the US a lot, I would suggest operating in USD as much as possible (billing, credit cards for expenses) to minimize currency transactions. Then you'll only take the conversion hit to pay yourself monthly or whatever. Having the USD account at a Canadian bank will make life easier in case you die or something (no need to deal with out-of-country assets in probate) and presumably you have an existing Canadian bank so an extra account won't cost many/any extra fees. That seems the simplest.
posted by GuyZero at 6:03 PM on April 7

Further clarification:

I'm a Canadian citizen who will be living in Canada, starting a Canadian business that will be operating in Canada. However, I will be selling hosted services via a web application, and primarily targetting Americans, since the market in the USA is much larger than that in Canada.

I expect I'll eventually have Canadian customers as well, but American customers will likely make up the bulk of my income.
posted by Imperfect at 6:09 PM on April 7

Just get a USD account at your local Canadian bank then, for sure. I had one for years simply to handle my dozens-to-hundreds of dollars of US writing income. I had a USD credit card from BMO as well. It's no different from a regular account, you can even convert currency via online banking.
posted by GuyZero at 6:15 PM on April 7

I'm a Canadian with my own business, and I work for both Canadian and U.S. clients. My main bank accounts are in Canadian dollars, but I did open a USD account (with TD, if that matters) for one main reason: I could deposit US cheques and keep the money there until the exchange rate was favourable to me. Last spring, if I recall correctly, the Canadian dollar and USD were nearly at par, but now the Canadian dollar is notably weaker, so converting that money now is more beneficial to me.

I don't think having a USD account changes anything from a tax point of view, but I rely on my accountant for those matters. She doesn't ask where I've deposited the money.
posted by curiouskitty at 6:37 PM on April 7

You may want to consider having three accounts: two in Canada (one USD and one CAD) and one in the USA (in USD, of course). This is how I did it when I ran a business selling stuff to Americans. Having an account in the States can make life significantly easier (e.g. if you have bills to pay in the USA, if you want to send a cheque to someone in the USA that their bank won't be fussy about, or if you have to deal with Paypal). I recommend opening your accounts at the Royal Bank so that you can open an account with US subsidiary. They let you transfer between your Canadian and US accounts online, without having to wait for transfers to go through.
posted by ssg at 6:53 PM on April 7

I have a meeting with Scotiabank tomorrow - the bank and branch were specifically recommended to me, but if they don't wow me incredibly well, I'll go visit Royal, thanks.

And regardless, it looks like I'll be getting two accounts - one in USD and one in CAD.
posted by Imperfect at 7:04 PM on April 7

A friend of mine, Canadian in Canada, sells primarily to organisations in the US that get their money from the US Fed government.

He's been letting his bank convert the USD income into CDN for the past 5 or 6 years. No complaints. Lately.

No idea if the USD is going to tank relative to the CDN (which has been... stable... against the EUR, RMB, and UKP lately) long term, though.

Strong USD: convert to CDN. Weak USD, keep it in USD unless you forsee the USD getting even lower.
posted by porpoise at 8:40 PM on April 7