In Ontario and Canada in general, it is easy to open up your business and really involves 3 main steps. While I will create an article about this topic later, here is a summary:
- Check for a good name using the NUANS search prior to getting your report
- Register your Master Business License with your proviince
- [optional] Register for a HST/GST account with the CRA to be able to charge such and as soon as your business pays more than $30k a year
So your side hustle is profitable, and it’s time to take it seriously and rebrand yourself as a small business owner. You may also have noticed some overlap between your personal and business finances, particularly if you only have one account.
Is a Dedicated Business Account Required?
Almost certainly, yes. Account agreements for personal deposits typically require account holders to use the account for personal purposes only, and using it for any other purpose (including business) may result in a breach.
Even at an early stage
You may be overlooking the small business banking benefits of separating your business and personal expenses. Even if you don’t necessarily believe that whatever you’re starting will be successful in the early stages of business.
You are the most knowledgeable about your industry. Consult your professional business, tax, and legal advisors on how to structure your business’ financial affairs.
Here are a few advantages to opening a business account:
Reputation
When starting a business, image is everything, and having a business bank account gives your company credibility with customers, vendors, and lenders. Clients can write checks (which many still do) to your company’s business name instead of paying you directly. When you have a business account, potential clients feel more secure and confident.
Separation of Taxes
A business account saves money for tax season so you don’t have to scramble for cash or, worse, borrow from family, friends, or the business to pay your taxes. It’s never a good feeling to be told you owe money and not have immediate access to cash.
Keep Track of Efficiency
It makes record keeping easier because you’ve separated what you’ve spent and invested in your business from your personal expenses.
Recognize Your Earnings
Having a business account is one of the simplest ways to track how well your company is doing. Keeping track of cash flow is much easier if you separate your personal and business finances, even if you’ve only had three sales on your first Printify store.
A separate business account helps you understand your yearly earnings, including profit and loss, whether it’s time to re-invest to grow your business (if you need more capital to buy more equipment, for example), how your business is growing year over year, and whether you need to increase your capital.
Keeping business expenses separate from personal expenses can make tax time easier. For example, my accountant told me that having a business account allows me to deduct Interac fees as a business expense. For more information, contact the Canada Revenue Agency.
Access to Business Opportunities
With a business account, you may be able to apply for a business credit card with benefits specific to your industry.
Increased Self-assurance
Moving a side hustle to a full-time business can be daunting, but with the right tools, you’ll be able to spend your time marketing and growing your business while knowing that you’ve laid a solid financial foundation. A business account may give you more confidence to pursue your objectives.