Why you need a business banking account
Check out these advantages of keeping your business banking activities separate from your personal banking account.
It’s wise to set up a bank account for your business sooner rather than later.
For one, separating your business and personal accounts will help you avoid trouble with the Canada Revenue Agency (CRA) – whenever business and personal expenses are mixed together, the agency likes to ask questions. Your small business will also appear more credible when you can accept payments under your business name rather than your personal name.
It’s also nice to know exactly how much money you have in your bank account for business purposes.
Not convinced a business bank account is a must? Here are a few more compelling reasons:
Reducing your taxable income with expense deductions is one of the great benefits of owning a business. Paying for business expenses from your personal account may cause the CRA to conclude your business activities constitute a hobby, and reject your claimed deductions.
A bank account dedicated solely to your business transactions supports your assertion that your operation is legitimate and can help avoid triggering an audit.
You’ll make your life easier when you can rely on your business bank account as a record on which to base your bookkeeping.
Although you’ll pay minor monthly banking fees when you open a business bank account, the benefits should outweigh the cost (not to mention most business banking fees are an allowable tax deduction).
Opening a separate business bank account will make it easier for your bookkeeper or accountant to prepare your financial statements and annual tax return. Sorting through hundreds of transactions in a personal bank account may incur additional bookkeeping costs – and may increase the likelihood of a record keeping error, which can cost you money in the form of missed eligible deductions.
A separate business banking account helps to establish commercial credit history for your company because your business activities are documented. A bank may insist on seeing two or three years of operating history before approving a commercial line of credit, a business loan, or a business credit card.
There are many different business banking packages available from Canadian financial institutions. As you compare banking packages, be sure to ask about:
At Scotiabank, our advisors understand business owners. We’re ready to help you – just as we’ve helped thousands of business owners like you to achieve their goals.
Get more business advice, access helpful resources and learn about available financing solutions by speaking with a Scotiabank Small Business Advisor today.