Business Bank Account vs. Personal Bank Account: What Should I Use for My Small Business?

Business Bank Account vs. Personal Bank Account: What Should I Use for My Small Business?

When you’re busy running a business and managing all the demands that come with it, it’s tempting to stick with what’s familiar—like your personal bank account. Many small business owners start this way and plan to “sort it out later.” But as income and expenses grow, that initial setup can become hard to manage.

The truth is that your bank account can impact many facets of your business, from organization and efficiency to tax reporting and risk management. This article breaks down the key differences between personal and business accounts, the right time to open a business bank account and the benefits of keeping your personal and business finances separated.

What’s the difference between a business bank account and a personal bank account?

A personal bank account is designed for your everyday use—things like making daily transactions, paying personal bills and receiving a paycheque. On the other hand, a business bank account offers features and tools that can help you accept customer payments, monitor your company’s cash flow, simplify tax time and manage your overall business finances.

Understanding the differences between the two can help set your business up for success—and avoid unnecessary financial complications as it grows.

Let’s take a look at some of the key differences:

Can I Use My Personal Bank Account for Business?

Mixing personal and business finances can create complications with bookkeeping, liability exposure and auditing. That’s why it’s recommended that you use a separate business bank account, no matter the details of your business structure or earnings.

In some cases, having a separate business account is more than just a recommendation:

• Corporation: If your business is incorporated, you’re required to have a dedicated business account since your corporation is a separate legal entity.
• Sole Proprietorship with a Business Name: If your sole proprietorship operates under a registered business name (versus your own name), you’re required to open a separate business account. (At RBC, we also require sole proprietors operating under their own name to have a business account.)

While some small businesses mix personal and business finances as a short-term solution, it can cause organizational issues, put your personal assets and privacy at risk and hurt your business credibility.

To illustrate this, here are some common “missteps” that can create bigger problems than most business owners expect:

I’m Self-Employed. When Should I Open a Business Bank Account?

If you’re self-employed, it’s best practice to open a business bank account as soon as you start earning or spending money for your business. That way, it’s easy to track your business cash flow—and keep business funds separate from your personal finances.

If you’ve already been using a personal account for your business, here’s a simple checklist to help you decide if you should make the switch to a business bank account.

Key Benefits of a Business Bank Account for Your Small Business

A business bank account makes it easier to run your business, offering benefits that support growth, improve organization and help strengthen compliance. Here are just a few benefits that show how a business bank account can work in your favour.

Clear Separation Between Your Personal and Business Funds

A dedicated business bank account makes it easier to:

• Track your company’s inflows and outflows
• Easily identify what funds you have for business expenses
• Build credit history for your company
• Improve your loan eligibility
• Appear professional to customers, clients and vendors
• Simplify reporting—whether it's for monthly meetings, tax prep or audits
• Provide bank statements to lenders and investors when growing your business

More Relevant, Helpful Banking Features

Unlike personal accounts, business accounts are designed around how businesses operate. They typically come with features that help you receive payments, track cash flow, deposit cash or cheques, and pay your employees, vendors and bills on time.

At RBC, our business bank accounts offer unique features that scale as your business grows, whether you’re just starting out or expanding your operation. This includes:

• No minimum balance requirement
• Unlimited deposits from your company’s Moneris^‡ transactions⁵
• Exclusive services and offers available only to RBC business clients

Accounting Integrations and Merchant Services

Most business bank accounts easily integrate with popular accounting software to streamline bookkeeping and other administrative tasks. If you were to use a personal bank account for your business, your personal day-to-day transactions would get in the way.

You can also connect your business bank account to merchant services like card payments and point-of-sale systems—making it a useful “bridge” between the moment your customer pays and the moment that financial record hits the books.

Enhanced Credibility and Professionalism

Paying your employees, vendors and partners from a business account signals professionalism and legitimacy. It allows you to proudly display your business name on cheques, invoices, forms and payment confirmations to help build trust. Plus, it reinforces that your business is established, organized and properly set up.

Improved Cash Flow Management

A business bank account gives you a clearer picture of your company’s cash position at any moment. It gives you better insight and control over monitoring your incoming revenue, outgoing expenses and account balances in real time.

This can help you better plan for upcoming bills, payroll, slow seasons, investments, inventory and more. It also gives you solid ground to identify cost-saving opportunities, optimize your spending, adjust your budgets, forecast cash flow, secure financing, make better business decisions and more.

Opportunities to Build Credit History for Your Business

By using a business bank account, you’re creating a financial track record and a professional relationship with the bank in your company’s name rather than your personal name.

This can help support applications for future business credit cards, lines of credit and loans. It’s always better to start establishing credit before you need it, so you can access it when the time comes.

Cleaner Financial Records, Auditing and Compliance

By keeping your business transactions centralized and categorized with a business bank account, you can make it easier to produce financial statements, work with accountants, meet reporting obligations and respond to potential audits—without having to scramble at the last minute for proper documentation. Not to mention, it’s important to maintain well-organized, accurate records for compliance with CRA requirements.

What Documents Do I Need to Open a Business Bank Account?

With all those benefits in mind, let’s walk through what you’ll need to open a business bank account. It’s easy at RBC—you can open a business account online, by phone or in person at the branch.

No matter which account you choose, you’ll need to be prepared with some documentation, including:

• One piece of personal identification, such as a:

  • Valid Canadian driver’s licence
  • Canadian passport
  • A Canadian Permanent Resident Card

• A business registration document to prove your business legally exists, such as:

  • Articles of Incorporationtooltip
  • Certificate of Existencetooltip
  • Master Business Licencetooltip

  The formal documents submitted to the Provincial, Territorial or Federal Government which establishes a business in Canada.

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  A certificate that indicates a company’s existence as of a specific date.

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  A one-page document that includes the name of the business along with the address, name of the owner(s) and the business activity.

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While the specific details and documents required will vary by financial institution, here are some common documents to have handy based on business type. If you’re unsure which documents you need to open an RBC business account, call our 24/7 Business Helpline at 1-800-769-2520.

Tip

After you open your business bank account, consider applying for a business credit card or a business loan or line of credit to start building credit history for your business (apart from your personal credit record).

Bank vs. Fintech: Which One Should I Choose for My Small Business Bank Account?

You have many options for opening a business bank account, especially now that a growing number of financial technology (fintech) companies offer business banking services.

While these fintechs are known for speed and convenience, opening a traditional business bank account can be just as quick (you could have your RBC business bank account number in less than 15 minutes)⁶. Beyond convenience, here are a few other ways your small business can benefit from banking with a traditional financial institution:

• Trust and Reliability: Unlike newer fintech companies, many of Canada’s major financial institutions are backed by decades of experience and established customer trust. RBC has been supporting businesses across Canada for over 150 years, a track record that many small business owners value.
• Digital and In-Person Services: Most fintechs offer digital-only accounts, making it harder to get in-person support or personalized financial advice when you need it. With a major financial institution, you can go to your nearest branch to complete in-person transactions and get support from experienced advisors.
• A Complete Financial Ecosystem: Beyond day-to-day business banking, major financial institutions like RBC can also give you access to operating lines of credit, loans, merchant services, payroll support, payment solutions, advice and more. As your business (and its financial needs) grow, it can be helpful to have all these services under one roof.

Opening a business bank account with a stable and credible financial institution like RBC can lay the foundation you need to operate and scale your business with confidence.

How Can I Minimize My Business Bank Account Fees?

Here are a few ways you can keep your account fees low while enjoying the right features for your business:

• Think about your transaction needs. Choose a bank account that aligns with your transaction volume and the types of transactions you’ll be making (digital vs. in-branch, for example).
• Review and compare fees. It’s important to fully understand the fees associated with your account—and how they’ll add up based on your banking activity. You can use our Business Account Fee Estimator to get a recommendation for the best RBC business bank account for your usual activity.
• Maintain any minimum balance requirements. Some business bank accounts require you to maintain a minimum account balance to qualify for a fee waiver. Be sure to read the fine print to know if your account requires a minimum balance, so you can maintain it.

Tip

The cost of your business bank account is a valid business expense, so you can claim it on your tax return as a deduction.

Power Your Small Business with an RBC Business Bank Account

At RBC, we offer bank accounts for businesses of all sizes and structures. You can choose from a range of chequing and savings accounts designed to streamline your finances, save you time and grow alongside your small business.

To complement your business account and provide even more tools for your everyday business needs, we also offer:

• Business credit cards that reward you for your spending through cash back, Avion points, travel perks and more
• Special offers and services beyond banking (such as Moneris^‡ payment processing) to help you streamline your operations and grow your business
• Online and mobile business banking to help you manage your finances from anywhere

Not sure which accounts, products or services are right for your small business? Help me choose the right business account.

Business Bank Account FAQs