No it is not compulsory for sole proprietor in Canada to open a business bank account. But, you can easily open one by submitting the necessary documents and completing the formalities.
Who is a Sole Proprietor?
A sole proprietor is basically a one man/woman army who runs the business that establishment. They solely take and implement the decisions on behalf of the business and enjoy the profits or assume losses. They do not have helping hands in partners nor are they registered like companies. Their business profits are included in their personal tax returns.
What is a Business Bank account?
A business bank account is the one that is opened in the name of a business and all the transactions of that particular business are done via that specific bank account. Just like a personal finance bank account, business accounts also have different types.
What is a Business Chequing Account?
A business chequing account deals with the everyday transaction of the business such as paying the vendors, receiving money from clients, paying sub-ordinates salaries etc.
If your business enjoys a cash flow surplus then you can set them aside into a separate business savings account to fathom any future contingencies or capital expenditure.
If you decide that you have enough savings and you wish to multiply your business’ money by investing them in the market, you can start a business trading account.
A cash management account acts as an umbrella, where you can integrate the business chequing account, savings account and trading account.
Do have a look at the **Best Business Bank Accounts in Canada
Do I need a business bank account for a sole proprietorship in Canada?
Legally, a Canadian sole proprietorship does not mandate its owner to open a separate business bank account.
What kind of businesses must compulsorily have a business bank account in Canada?
- If your business has a distinct legal name.
- If the name of your business is registered in its name.
- If your business is under the Canada Revenue Agency.
- If you bill your clients in the name of the business.
- If you receive cheque from your clients in the name of your business.
- If you pay tax in the name of your business.
Why is it important to have a business bank account?
- It becomes easier to separate your personal as well as business finances
- You can have a track of your business cash flows
- Aids for better budgeting a planning
- Exhibits professionalism
- Some banks offer business-oriented offers such as multiple currencies, low-cost e-transfers
- You can develop a separate credit rating for your business
- Helps when you are in need to apply for a business loan
Canadian Sole Proprietors and their Business Bank Accounts
Although it is not compulsory for every sole proprietor in Canada to open a business bank account, they can easily open one in Canada. This is possible by submitting two identification proofs of the owner, Business Name Registration, Master Business License and Professional Practice License for improving the credibility of their business.