Do I need a business account?

August 12, 2021 12:39 PM

And if so, can you do it without needing an already extant business account at another bank?

CanadaFilter!

I am in the process of crossing the i's and dotting the t's for my one woman coaching business, and I have now stumbled across the dilemma of opening a business bank account. I am happy to do so if necessary, but is it necessary? I mean, I am not planning on hiring anyone as coaching is a solo business (for me, at least) but I keep thinking of good record keeping and money tracking.

And if I do need to, how in the heck do I do it if I don't have a business bank account anywhere else? I currently bank with Tangerine and in order to apply for the bank account process, I need to already have the ability to externally link an already extant business bank account with another institution.

I do not have that. I do not also have a business attestation that they seem to require. (Again: one woman.)

Hope me, freelancers and sole business owners of MeFi Canada! I am so confused, and do not want to get stick on this detail at the expense of my open for business checklist.

posted by Kitteh to Work & Money (11 answers total)

Response by poster: *get stuck, I mean
posted by Kitteh at 12:40 PM on August 12, 2021

Generally, mixing money between your personal account and your business account is a bad idea. I am not familiar with Canadian revenue and tax laws, but in the US if you do mix up the money your taxes will be a PITA when it's time to do them, esp. when it's time to do deductions and expenses.

You can walk into any brick and mortar bank to open a business account if you have the right paperwork (incorporation papers, tax ID paper, and so on) Not sure what the exact requirements are in Canada.
posted by kschang at 12:50 PM on August 12, 2021

In my experience (10 years as a sole proprietor in the US), the only reason you need a real, official business account is to cash checks made out to your business name. If you do business under your own name, checks will be made out to you, so you can deposit them in a personal account.

That said, I would recommend having a second personal account that you treat as a business account, and use only for business. In the US, there's nothing at all illegal or shady about doing it this way, but having all business/personal money stay separate is really helpful. (Of course, you can just transfer $$ from your fake-business account to your personal account to pay yourself.)

Again, this is all US-based, and I have no idea about Canadian laws on this front.
posted by nosila at 1:04 PM on August 12, 2021 [1 favorite]

Best answer: I'm a freelancer in Canada and I've never needed a specific business account. Once you start making over $30000 of self employed income a year you must register for an HST# and collect HST to remit to the CRA, but that is just a matter of keeping track of money, whenever you store it. I keep multiple accounts with Tangerine for my own organizational needs.
posted by stray at 1:07 PM on August 12, 2021 [3 favorites]

Best answer: Is the business going to be making and receiving payments under its own name (eg Kitteh coaching inc.) or under your name? If its just under your name I think you'll be fine just opening a new Tangerine account and using that solely for the business. If it's under the businesses name then yeah you'd need to open up a small business account.
posted by any portmanteau in a storm at 1:18 PM on August 12, 2021

Response by poster: Popping in to say that I will be using my own name! No catchy business name, I'm afraid.
posted by Kitteh at 1:24 PM on August 12, 2021

Best answer: You don't strictly need one, but you should have a separate account, even if its just a second personal chequing account. It just makes things easier at tax time and if you ever get audited.

I am a sole proprietor in Canada. I have no employees. I pay HST. I found it so much easier to have a separate chequing account and credit card for my business. All my expenses go on the card, all payments come out of that account, all my income goes into it.

FYI, IANYL but even if you don't use a business name, you may need to register with your province as a business. In Ontario, this means registering for a "master business licence" which is valid for five years.
posted by dazedandconfused at 1:46 PM on August 12, 2021

Best answer: I'm in Ontario and pretty sure you don't need the master business licence if you're using your own legal name, I certainly don't have one, nor any of my freelancer buddies. But google it.

There are lots of past questions about sole proprietorships on the PersonalFinanceCanada subreddit if you don't mind wading through some nonsense.

I do use an accountant to make sure my expenses and my Form T2125, Statement of Business or Professional Activities are looking good.

Go forth with your checklist!! You can tidy up your money organizational plan as you go. Just make sure you save enough for taxes. The big changes will come when you a) start making more than $30000 as I mentioned above and b) start having to pay more than $3000 in income tax, as you'll then be required to pay taxes in quarterly instalments. But you'll get there.

I haven't personally taken any of her courses but I follow Jami Monte, CPA on instagram and pick up the occaional sole proprietor tax organization tip.
posted by stray at 2:25 PM on August 12, 2021 [1 favorite]

Best answer: Sole proprietorship in Ontario here - the bank fees for a business bank account are simply outrageous, so I've always just used a separate chequing account, merchant PayPal account, and credit card. I have a Master Business Licence for Ontario but only because I operate under a business name rather than my own name. For taxes and stuff: you'll probably want to go ahead and register for a Business Number, and get yourself a My Business Account with CRA; you might as well get set up for HST right from the start. When you get access to your My Business Account, you will likely want to file an election GST74 to use the Quick Method of Accounting, which will make your HST/GST returns SO. MUCH. EASIER. and save you all kinds of time and money.
posted by Mary Ellen Carter at 3:31 PM on August 12, 2021

Sole proprietor in the US, doing business under my own name. I haven't ever had a business account, but also the nature of my business means I might receive 20-25 large payments over the course of a year, as opposed to a larger number of smaller payments, so it's been quite easy for me to keep track of income (& expenses too). My accountant hasn't raised any alarm re: the way I do things so I'm going to continue as is. YMMV.
posted by BlahLaLa at 5:09 PM on August 12, 2021

Based in the US, I think that barring any Canadian-specific laws, registrations, taxes, etc. I think that it’s up to you. You can either decide to start out by keeping things separate so it’s a clean division. Or you can see how it goes and when you meet a certain threshold you can dive into getting a business account. My accountant recommended it, but keeping an accurate and detailed record of business income, expenses, etc. is more important.

I have an assumed business name but I can also receive checks on my own name. I used my assumed name certificate to open the account but you will have to check what your bank requires. Here it’s hard to find a free business account and they usually have a high minimum balance. Even though it’s a major bank (Citibank) I have to write myself paper checks to transfer money to my personal account at another bank. I’m just saying that there’s weirdness in business banking that I didn’t expect.

The only time having a business checking account in the last 13 years has been a real differentiator is when I’ve had corporate clients for whom it made me seem more “legitimate” and when applying for a pandemic loan. My industry is mainly sole proprietors and all of them without business accounts had a horrible time securing COVID-19 PPP loans since they didn’t have “an existing business relationship” with a bank. That’s a very specific circumstance, though it highlighted the issue for my partner who is now registering his business and getting a business account (after 12+ years operating without) after going through the stress of that mess.
posted by Bunglegirl at 8:19 PM on August 12, 2021