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The Best Bank Accounts for Small Businesses in Canada for May 2022

Posted on February 10, 2022 by Jack Hauen

If you’re reading this, it likely means your small business is doing well enough that you might need a separate bank account. 

So, congratulations!

But being a small business owner comes with enough headaches. The last thing you want to do is sort through a million options for how to organize your firm’s cash flow and payments.

We’ve done the heavy lifting for you. Read on for our recommendations for the best small business bank accounts in Canada in 2022.

Can You Use a Personal Bank Account for Business Expenses?

It’s almost always wise to separate your business and personal accounts. This keeps things simpler come tax time. And there’s nothing that attracts the attention of the Canada Revenue Agency (CRA) like mixing personal and business spending. You’re basically asking for an audit.

That said, if you’re a sole proprietorship, and you don’t make a lot of business-related transactions, you might be able to get away with using just one personal account for both. 

Be warned, though: if your books aren’t in tip-top shape, things could get confusing fast. 

If you need to buy things often for your business, or if you have to pay employees, you’ll almost definitely need separate accounts. 

And if you run a corporation, it’s illegal to do business through your personal account.

What’s the Difference Between Personal and Business Bank Accounts?

Both personal and business bank accounts usually come with chequing and savings accounts. 

Just like you make purchases using your personal chequing account, your company’s chequing account is what you’ll use to buy inventory, pay employees, and make other business-related purchases.

The convenience of separating your company’s finances into a business account often comes with higher standard fees, though. There may be limits to the number of transactions you can make per month. And you may have to keep a minimum balance to avoid financial penalties. 

And opening one requires some paperwork to prove that you run a business. The bank is required to report this information to the CRA.

HSBC offers Fusion, which allows customers to manage their personal and business accounts in the same place.

What Should You Look for in a Small Business Account?

When you’re looking at business bank accounts, you want to make sure you’re not getting ripped off. Here are some things to keep in mind: 

  • Monthly fees: Different banks have different price points.
  • Minimum balance: Check out how much you’ll have to keep in the account.
  • Maximum monthly transactions: Think about how many transactions you usually make per month and how many the bank allows for — as well as how much it costs to go over that amount.
  • International fees: If your company does business in other countries, look at the conversion rates and fees.
  • Sign-up bonuses: Some banks will give you cash bonuses or other goodies to get you into their ecosystem.
  • Other perks: Things like automatic bill payments or access to financial coaching could make all the difference for your small company.

Online Vs. In-Person Banking for Small Business

Gone are the days of traditional banks controlling all your financial options. There are a ton of new financial startups in Canada right now. Many are looking to beat banks at their own game, offering credit cards and perks to attract younger customers — like Koho, Wealthsimple CashNeo Financial, and others.

Online-only competitors offer business savings accounts, sometimes with higher interest rates than regular chequing accounts — like the Tangerine Business Savings Account. These are usually low, or no-fee options that can be helpful for sole proprietors with few business expenses to separate their business earnings. 

But the sole online-only bank to offer a business-specific chequing account right now is Alterna. You can use the popular online option EQ Bank’s chequing account for business purposes. But it won’t come with any perks that the major brick-and-mortar banks can provide, like free transactions or business advice.

Keep in mind that big, in-person banks also have online banking. There are more tantalizing offers for everyday spenders to switch to an online financial institution. But as of right now, there are few reasons not to go with a “big six” bank for business banking.  

How to Open a Business Bank Account in Canada

The process of opening a business bank account is getting easier every year. You’ll need to gather some documents, like your business name and registration — you likely won’t need to bring them to the bank. Most banks allow you to complete the entire process online. And they’ve invested in making the process straightforward to attract new clients.

Documents You’ll Need

Sole Proprietorship

  • Government-issued photo ID
  • Registered trade name
  • Business license(s)

Partnership

  • Government-issued photo ID
  • Registered trade name
  • Legal paperwork about your partnership
  • Tax documents

Corporation

  • Government-issued photo IDs for you and the signing authorities
  • Articles of incorporation
  • Business number
  • Business license(s)
  • Certificates of existence and compliance

Best Bank Accounts for Small Businesses

BMO eBusiness Plan 

Bank Of Montreal
  • Monthly Fee: $0
  • Minimum Monthly Balance: None
  • Monthly transactions: Unlimited (electronic, not including e-Transfers)
  • Other perks: Current offer: a free website for 6 months
  • The Bank of Montreal’s eBusiness plan is its most popular business account, and it’s easy to see why. It comes with no monthly fees, no minimum balance, e-Transfer daily limits of up to $3,000, and unlimited electronic transactions. If you do most of your banking on your tablet, computer, or smartphone, it can be a great choice.

    However it doesn’t come with any free deposits.

    For more flexibility, BMO’s Business Start account is $6 per month and comes with 7 free transactions, as well as 2 free e-Transfers. 

    If you need a bit more, you can go with one of BMO’s lower-end Business Builder accounts. For instance, Business Builder 1 is $22.50 a month with no minimum balance, and 35 free transactions.

    RBC Digital Choice Business Account

    Royal Bank dividend
  • Monthly Fee: $5
  • Minimum Monthly Balance: None
  • Monthly transactions: Unlimited electronic debits, credits, and cheque deposits, and 10 free outgoing e-Transfers ($1.50 per e-Transfer after)
  • Other perks: Unlimited Moneris deposits
  • The Digital Choice account is another great choice if you’ll do most of your banking online. The monthly fee is cheap, but the paper transaction fees are where they’ll get you. 

    A paper debit or credit transaction will cost $2.50 each, and cash deposit fees are $5 per $1,000 at a branch. 

    If you think you’ll need to visit a branch to make in-person paper transactions, they cost half as much with the Flex Choice Business Account. That account is only $1 more per month.

    Scotiabank Right Size Account 

    ScotiaBank
  • Monthly Fee: $6
  • Minimum Monthly Balance: None
  • Monthly transactions: $1.25 each (up to 15), $1.15 each (16-50), $1 each (51+)
  • Other perks: Overdraft protection, online business taxes
  • The Bank of Nova Scotia’s Right Size account is a low-cost, straightforward option with no minimum balance. It comes with overdraft protection, a solid digital banking experience, and simplified business taxes.

    The downside? It’ll ding you every time you make a transaction. Those can add up if you make a lot. 

    There is another option if you’re confident you can keep a good amount of cash in your account, though. Scotia’s Select Account will refund its $20 monthly fee if you have $20,000 in the account. That comes with 25 free transactions, 50 free deposits, and up to $6,000 in cash deposits. Transactions are $1.50 past that limit. 

    The Select Account’s number of free transactions goes up with higher minimum balances:

    • $35,000: 70 transactions ($40 monthly fee if minimum balance isn’t met)
    • $45,000: 125 transactions ($75 monthly fee if minimum balance isn’t met)
    • $75,000: Unlimited transactions ($120 monthly fee if minimum balance isn’t met)

    The Scotiabank Basic Business Account is another option. It has a $10.95 monthly fee which is waived with a minimum balance of more than $8,000.

    CIBC Everyday Business Operating Account

    CIBC Investors Edge
  • Monthly Fee: $0
  • Minimum Monthly Balance: $15,000
  • Monthly transactions: 30 free (including e-Transfers) then $1 each (self-service) or $1.25 each (full-service)
  • Other perks: Deposit $3,000 per month for free
  • The Canadian Imperial Bank of Commerce's Everyday account is a cheap, no-frills small business solution that has no monthly fee — as long as you keep $15,000 in it. Its account package allows for $3,000 in cash, $300 in coin, and 25 cheques to be deposited each month for free.

    The banks will also text you when you’re about to be dinged for non-sufficient funds, to give you a chance to get things in order. 

    CIBC also offers advice sessions with business banking experts. 

    For larger small businesses, the CIBC Unlimited Business Operating Account will waive its monthly fee with a minimum balance of $45,000. It comes with unlimited transactions.

    TD Basic Business Plan 

    TD stock dividend
  • Monthly Fee: $5
  • Minimum Monthly Balance: None
  • Monthly transactions: 5 free, $1.25 each after that
  • Other perks: 5 free deposits per month
  • TD’s basic plan is barebones, but if your business doesn’t have a lot of transactions or deposits, it could be a great choice at just $5 a month. 

    If you’re confident you can maintain at least a $20,000 monthly balance, you could go with a TD Every Day Business plan. It costs $19 a month if you don’t maintain the balance. You’ll also get 20 free transactions and 50 free deposits per month. 

    There are two other Every Day plans, each with 50 free deposits:

    • $39 a month (waived with a $35,000 minimum balance), and 60 free transactions
    • $72 a month (waived with a $45,000 minimum balance), and 120 free transactions

    Best Online-Only Bank Accounts for Small Businesses

    Alterna

    Alterna
  • Monthly Fee: $0 ($5 if minimum balance isn’t maintained)
  • Minimum Monthly Balance: $3,000
  • Monthly transactions: No limit for debit and credit transactions. Unlimited incoming e-Transfers, but just 6 free outgoing e-Transfers.
  • Other perks: Introductory offer of no monthly fees for 6 months and a small business line of credit.
  • Right now, Alterna is the only online-only bank offering a chequing account for Canadian businesses. 

    They’re specifically targeting small companies with their Small Business eChequing Account. It offers unlimited electronic debit and credit transactions, and unlimited incoming e-Transfers. If you pay your employees via e-Transfer, though, there’s a limit of 6 free ones per month.

    Owners can also apply for small business loans from $500 to $300,000 online, through Alterna’s partnership with Thinking Capital.

    Wise (Formerly Transferwise Business)

    Wise bank
  • Fee: $42 (one-time)
  • Minimum Monthly Balance: None
  • Monthly transactions: Cost varies by currency
  • Other perks: Low-cost international transfers and payments
  • Wise could be a good option if you do a lot of business across borders. 

    Wise markets itself as a PayPal alternative with lower fees and instant transfers to hundreds of countries. It’s free (minus the fees) to just use its money transfer service.

    But if you want to set up things like an IBAN, sort code, and routing number, there’s a one-time fee of $42.

    It also costs $9 to order a Wise debit card. And there are fees to use ATMs, receive USD wire transfers, and hold more than €15,000 in euros.

    It allows businesses to pay up to 1,000 people at once and offers convenient perks like multiple team members who can make payments. 

    It secures funds through Barclays and Wells Fargo.

    FAQs

    What type of bank accounts should a small business have?

    Most business bank accounts come with a basic business savings account and chequing account. You only need one account to satisfy the legal requirements of incorporation. 

    But it might be more convenient to have a chequing account to pay employees and make purchases; and a savings account for, well, savings.

    Can you use the same bank for your personal and business accounts?

    Yes. If you use RBC for your personal banking, there’s no reason you can’t use it for your small business as well. It will also make things straightforward to have everything under one “roof.”

    That said, opening up a business account is a good opportunity to play the field. Check out offers and perks from other banks, which are always looking to poach clients from each other. You might end up switching your personal account as well!

    Do you need a separate bank account for each incorporated business?

    Yes. Each incorporated business must use separate bank accounts in Canada. These can be with the same bank. 

    This is because each corporation is its own separate entity, and must be treated as such. If you’ve ever heard the term “corporations are people,” this ties into that legal precedent.

    Do you need an incorporated company to open a business bank account?

    Nope! You’ll need documents to prove that you run either a sole proprietorship, a partnership, or an incorporated company. See above for the full list.

    Who can open a business bank account in Canada?

    Anyone who owns a business! That includes a sole proprietorship, a partnership, or a corporation. You don’t even need to be a permanent resident to create a business bank account.

    Do customers care if I use my personal account for business?

    Aside from the tax and simplicity reasons to separate your personal and business finances, a separate business account can help the perception of your company. 

    Using your personal account for business can make it look like your small business is a “side hustle,” and not a serious venture. 

    While we can’t speak for every customer or supplier, some may take you more seriously if you have a separate bank account for your business.

    Disclaimer: The writer of this article or employees of Stocktrades Ltd may have positions in securities listed in this article. Stocktrades Ltd may also be compensated via affiliate links in this post.

    Jack Hauen

    About the author

    Jack Hauen is a journalist, freelance writer, and aspiring professional credit card churner. His reporting has appeared in Canada's top publications, including the Globe and Mail, Toronto Star and National Post. When he's not lurking r/PersonalFinanceCanada he can often be found in the Algonquin backcountry, wheezing through a portage that looked smaller on the map.