Starting a Business in Canada

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May 30, 2011 - 3 minute read - banking

Opening A Business Bank Account

Business transactions should always be kept separate from your personal transactions. For this reason, every business owner should have a separate bank account for the business. Banks have business bank account products that are different than personal chequing accounts. Running your business out of a separate personal chequing account may violate the terms of service with your bank. I recommend that you open a business bank account from the beginning to avoid the hassle of switching accounts later as your business grows.

It’s best to make an appointment to open a business account. It can be a bit of a lengthy process so you want to make sure that you can set aside an hour of your time. If you are operating your business as a sole proprietor or a partnership, you will need to have documentation showing that you have registered the name that your business is operating under. The process for registering your business’s name varies from province to province so you’ll have to check with your provincial government. If you have a partnership agreement, you should bring a copy of it. If your business is incorporated, you’ll have to bring along your certificate and articles of incorporation. If you have a stamp with your corporate seal, you should bring a copy of that as well.

You will have to make a decision about signing cheques. As a control mechanism, some businesses choose to have all cheques signed by two people. This can add a layer of security but it will also be less convenient and it will limit the scope of what you can do with the bank’s online banking services. An account that requires two signatures will not be able to pay bills online because there is no way to verify that two signatories consent to the transaction. It will be impossible to issue debt cards for purchases for the same reason. I’ve seen many businesses where two partners decide to have cheques require two signatures only to have one partner pre-sign a bunch of blank cheques so the partner can pay bills. This effectively negates the safeguard that was originally intended. Think carefully about requiring two signatures and make sure you are doing it for the right reasons because the hassle involved is considerable. Everyone who will sign cheques on the account, either alone or as part of a dual signature system, should come with you to the appointment as the bank will want samples of their signatures on file.

Opening a business bank is a relatively straightforward process but you can save yourself a lot of time and hassle if you decide how you want the account set up beforehand and bring all the necessary paperwork and people to the appointment.