At first glance, business chequing accounts and personal chequing accounts might seem to simply be two different versions of the same thing. Indeed, the similarities are many: both offer basic deposits and withdrawals, as well as check and debit card use. Depending on the financial institution, both may also offer other features, such as online access and overdraft protection.
Business chequing accounts, however, tend to have higher usage fees and balance minimums than personal accounts, sometimes in exchange for higher transaction limits. Most business accounts also allow business owners to issue credit or debit cards to employees for company-related spending.
Many business accounts allow the account to process and receive credit card payments from customers. Another common feature is the ability to grant signing power to an individual other than the primary account holder.
A business account bears both the name of the account holder (or holders), and the name of the business. Additional paperwork is usually required to open such an account.
In some instances, you may be legally obliged to open a business account for your business, thereby ensuring appropriate separation of your personal and professional finances. Check the rules and regulations in your jurisdiction before starting any new venture, and be sure to set up a business chequing account early in the process if it’s required.
The main benefit of a business chequing account is that it offers a secure place to hold and manage the money that moves through your business. Owners can monitor spending and create budgets based on their monthly statements.
Here’s a closer look at a few more reasons why you might want to open a business account for your new business, even if it’s not legally required.
Better bookkeeping saves your business time and money
Mixing up money tends to get messy fast. That’s why separate accounts for personal and business use are so important. When tax time comes and you’re trying to track spending or identify deductions, it’s significantly easier to sort everything out if all your business transactions belong to a single account.
Having a business account might end up saving you time, money on accountant’s fees, and a bunch of potential headaches along the way. That goes double should you ever get audited, which would expose your entire personal account to auditors if it’s not separate from your business.
A pathway to building business credit
A business chequing account allows your business to establish a credit rating, one that’s independent from your personal credit score. Over time, account holders with good credit can apply for business credit cards, or obtain more favourable terms on a business loan, mortgage, or line of credit.
Present a professional image
A business chequing account lends your business a welcome dose of legitimacy in the eyes of customers, suppliers, contractors, staff, and anyone else who transacts with you. This is especially important with customers: buyers feel better when they believe they’re dealing with a professional, trustworthy business, and that’s a hard image to project if you’re still trying to handle business transactions through a generic personal bank account.
Finally, your business chequing account should allow you to receive secure credit card payments from customers, making it safer and easier to sell.