No matter who you are, having a bank is incredibly important, and for a business, having a bank is the lifeblood of how the company operates. Your bank account is incredibly important, and as a business having a great plan is vital.
In Canada, while there are many banks and credit unions available, you’ll find the primary options to be the five major Canadian banks: RBC, TD Bank, Scotiabank, CIBC and BMO. They have a plethora of options available with regular and online banking options.
With this guide, we’ll walk you through the process, answer some questions you may have and take you through the five major banks with some pros and cons of each.
In Canada, there are four primary types of businesses:
-Sole Proprietorship: A sole proprietorship is a business with one owner who controls everything, where the business and owner are considered the same entity. This means in tax reporting and liabilities there are no differences or separation between the owner or business, providing various positives and negatives.
-Partnership: A partnership shares many similarities to a sole proprietorship but is held with multiple partners. That means the ownership and management is shared between multiple owners, meaning everything that affects one owner affects the other.
-Corporation: A corporation is the main type of business the average person thinks of, being a separate entity from the owner(s) and can have one owner or multiple depending on how the shares are dispersed. Corporations can be publicly traded or privately owned (always owned by those who own shares in the company), with totally separate tax reporting and liabilities from the owner(s).
-Cooperative: A cooperative shares similarities to a corporation but is owned by its members and those who use the services or products of the company, rather than shareholders who may not have any connection to the businesses other than ownership (or a piece of ownership).
As a company, it is possible to open a business bank account with owners having to reside in Canada, particularly with the five major banks having some operations and connections outside of Canada.
So as long you’re willing to go into a branch, opening a business bank account is a simple process, but to keep it simple it’s important to go in knowing what documentation you require for your particular type of business. Generally, the process is as easy as going in, submitting the documents and signing some forms.
To start, the important thing to know is what you need as the owner of the business, the personal information/documents you need to bring. Generally, it’s just two forms of identification such as your passport, driver’s license, provincial ID card and more.
Then comes the business documents required, which is where you’ll find differences based on what kind of business you opened.
-Sole proprietorships: A sole proprietorship is the simplest, as you’ll need your master business license and the registered name.
-Corporations: Corporations are more complicated but start the same with the business license and the business name/number registered. From here you may find a variety of different documents required depending on your circumstance, including tax forms, proof of identification, I.D. for anyone who will have signing authority, various certificates and more. For full details of what you need, check with the bank you choose to see what they require before heading in.
-Partnerships: Partnerships are similar to a sole proprietorship, though you’ll need the same documentation for all members of the partnership.
-Cooperative: A cooperative will fall more in line with the corporation, requiring forms of documentation for the business itself and anyone who will have signing authority.
Because documentation may vary slightly from bank to bank you should always take the time to contact your bank and find out exactly what you need to open your account.
The answer to whether or not you need to physically be present to open a Canadian business bank account is dependent on the bank you choose, as there is no legal requirement, thus making it dependent on the bank. However, the more realistic answer is that in most cases you will need to go in-branch to open an account.
In most situations, the bank prefers to have you physically present and in-person, with the proper documents to open the account. In the cases where you may be able to open an account without being in the country, it will usually be a more complicated process and may even have restrictions.
Alternatively, there are some international banks available in Canada, and if a bank in your country operates in Canada as well, then you may be able to open an account with them in your home country. However, this may also provide some setbacks, difficulties or extra costs that may not be ideal.
RBC is the largest bank in Canada, and as such a widely used option for businesses across the country. RBC also operates in other countries, including the United States, and brings a variety of advantages to the table.
While their accounts can be costly, they do provide a online only bank option with no monthly fee, a great option for those who do all their business online. You receive unlimited transactions at no cost so long as they’re online. But, for those who operate with many regular transactions in a brick and mortar store or through physical cheques, they have standard bank options available as well.
You’ll find some similarities across the five major banks in their business account options, but you’ll find operating accounts, savings accounts and more options. With a bank like RBC, you’ll also find a lot of resources to help develop a financial and business plan, which may be important things to consider when choosing your bank.
TD Bank is the second largest bank in Canada and offers many similar bank account options as RBC and the other big five.TD Bank doesn’t have the online only account that RBC does, but they do have various accounts and resources available. TD also provides different options for larger corporations and businesses vs small businesses, and community or non-profit organizations as well.
With TD Bank you’ll also find resources and business plans to help suit your needs. If you find the right account for you, you won’t go wrong with TD Bank as your main option.
At Scotiabank you’ll find various options available for small businesses and mid-sized businesses, with some resources available for particular industries as well like agriculture, funeral services and skilled trades.
You’ll find BMOs options to be more closely related to RBC, particularly as they are the only other bank of the big five to offer a no monthly fee, online business account. It’s a great option for those who operate with online transactions, but for other businesses you’ll find most of the accounts to fall close to the average monthly fees and transaction amounts.
CIBC also provides a variety of options for small businesses and some specific options for particular industries. You won’t find too many huge differences between the five major banks, so often you’ll want to consider the bonuses each provides as to what works best for you.
While the accounts are similar, and most of the information is available online, the reason most of the major banks want you to come in and see an advisor when opening a business account is to get more context and information for each account and find what will work best for you. It’s not required, but is a major help.
Business accounts in Canada can be expensive, and that expense varies depending on the number of transactions you need to do and the amount of money you can leave in your account. We’ll examine the primary costs you need to consider, and how much it may or may not vary based on your particular needs. The primary costs you need to consider are the monthly fees, transaction fees, ATM fees and international transfer fees.
The first cost you’ll need to look at is the monthly fee, and this cost is where a lot of the cost can come in for small businesses. For businesses who do the majority of their transactions online, RBC and BMO have online accounts with no monthly fees, where you only pay for any individual transactions you make that aren’t online-based. These are great, low-cost options, but won’t work for every business. If your company operates primarily in brick and mortar, you’ll need a regular account. TD Bank, for example, has an account that starts at $5 per month, but only gives five transactions each month and each one following is $1.25. Their next account starts at $19 per month (with 25 transactions) and then there’s a $125 per month account that gives unlimited transactions. Many accounts will have rebate options for a monthly minimum balance that you keep. Each bank has its own set of accounts with different pros and cons, so you’ll want to look at further and find the best one for you, but note that the monthly fees can get expensive, especially if you don’t anticipate having a large minimum balance that stays in the account each month.
Transactions fees are next to consider, as anything less than unlimited transactions will be something you’ll want to monitor. If you only have one or two major clients, and only get a couple of bigger cheques per month, then you may have to worry so much about transaction fees but consider how often you have to pay yourself and any employees you may have, and your expenses as well. When you start to look at it, you may start to find your number of transactions quickly adding up, so a wise move would be to write down all your expected bank transactions to see what’s best for you. Most transactions will cost just under or above a dollar, but that adds up fast when you have a lot of transactions to consider.
If you anticipate having to go to the ATM often, this is another expense to consider. For an unlimited transaction account this isn’t a problem, but for accounts that have a limit, you may need to consider ATM fees, and if you anticipate ever having to use other banks ATMs or even use them internationally. For most, this probably won’t be a major problem, but it’s wise to know all your options and keep it in mind before committing to a bank account.
The last primary expense to consider before choosing your bank account is international fees. This includes exchanging currency, paying international vendors, purchasing international products and if you travel internationally for business. With banks, you can expect a large markup to be added to exchange rates (usually around 2.5%-3.5%), and additional transaction or ATM fees as well. If you expect to be working with other currencies and other countries, consider the fees you’ll have to pay and how they may affect you. However, if you regularly expect to exchange currency or purchase internationally, then you should consider Knightsbridge Foreign Exchange as an option for all your exchange needs.
With Knightsbridge Foreign Exchange, we provide the opportunity to exchange currency or make international payments with no transfer fees and the best exchange rates in Canada. If you’re a business that regularly needs to convert USD to CAD, then you’ll find tremendous savings with KBFX. Not only do we make it fast, easy and efficient; we regularly come in about 2% less than most major banks and other financial institutions. On a $100,000 exchange, that 2% would save you $2,000. Additionally, we can make international payments, providing no transfer fee and converting your funds with our low and reasonable exchange rates. As we support all major Canadian banks, no matter their exchange fees, we’ve got you covered with fast service and the best currency exchange rates.