Business Chequing Accounts

Individuals are not the only ones who write cheques, make deposits and pay their bills online. Businesses require these services too, and so banks offer business chequing accounts to meet their needs. Here’s a quick look at how business chequing accounts operate, some of the fees associated with having one and how to choose the right account for your commercial enterprise.


What are business chequing accounts?

A business chequing account is simply a bank account that allows a business to write cheques and perform other kinds of transactions normally associated with a chequing account. These include debit transactions at other businesses, electronic banking, ATM withdrawals and of course, in-branch banking, too.

As with any other bank account, the principal in a business chequing account is guaranteed and insured by CDIC. Mind you, just like personal chequing accounts, little if any interest is paid on your account balance, unless the balance is very high.


What types of chequing accounts exist?

Depending on how many transactions per month a business conducts, there are many different business chequing accounts available to choose from. For example, a basic business chequing account might include five (5) free transactions, whereas unlimited free transactions are available for the more expensive accounts suited to companies that do a large volume of transactions.

Of course, when we say “free” transactions, we really mean “included” transactions, because there is a monthly fee for most business chequing accounts, as there is with personal ones, too. The most basic business chequing accounts typically cost $5-7 per month, whereas an unlimited account’s monthly fee can be anywhere from $35-125, depending on which lender you bank with. In both cases, banks often waive the monthly fee, if a minimum balance is maintained throughout the month.


What types of transactions can you perform with business chequing accounts?

It’s important to know what counts as a transaction for a particular account – especially if your business only has a limited number included in its monthly plan. For example, with the TD Small Business chequing accounts, transactions include any of the following:

  • Deposits, withdrawals, transfers, and bill payments at any TD Canada Trust branch, Green Machine ATM or online
  • In-branch night deposits
  • Telephone operator-assisted transactions, including bill payments
  • Telephone automated transfers and bill payments
  • Debit payments in Canada and the U.S.
  • Cheques, pre-authorized payments and automated transfers

Some banks, such as TD, also have a separate number of “deposit items” that a business can put in their account. Deposit items are things like cheques, money orders and bank drafts. This might seem confusing, because a company could have 50 included transactions, but only 20 included “deposit items”. In this example, the company could stay within their 50 transactions but incur extra charges if they exceed the maximum number of deposits. For this reason, it’s important to know the details of your monthly plan, to prevent your business from inadvertently paying fees over and above the monthly account charge.

Likewise, cash deposits are often a separate feature of a business chequing account (probably because they require the bank to count all the bills being deposited). For that reason, banks may also offer a set amount of cash deposits per month (say, up to $5,000) that are included in a chequing account. Alternatively, a business might be charged a small fee for every cash deposit (e.g. $2.00 per every $1,000 deposited).


Other fees associated with business chequing accounts

Aside from the monthly fee, there are some other charges associated with maintaining a business chequing account. If your monthly plan does not come with unlimited transactions, there will be a fee for each transaction over and above the number included. For example, if you have 10 included transactions but end up doing 15 transactions, your business will be charged for the 5 transactions that were not included. A typical fee for a transaction is $2, so in our example that would cost the business $10 (5 x $2). Fees do tend to vary based on the particular transaction, so make sure you familiarize yourself with all the possible charges associated with the business chequing account you’re interested in.


How to open a business chequing account

Opening a business chequing account requires documentation that is much different than that which is required when opening a personal chequing account. Here is a list of the documents you will need to provide, depending on the type of business you own:

Sole Proprietorship:

  • Business owner document: signature plus 2 pieces of ID, one with a photo, of the sole proprietor
  • Business document: trade name registration (not required if you operate in your own name)

Corporation:

  • Business owners’ documents: signatures plus 2 pieces of ID, one with a photo, for all the owners with an interest of 25% or greater in the business
  • Signing authorities’ documents: signatures plus 2 pieces of ID for all people who will have signing authority for the account
  • Articles of incorporation
  • Assuming the business has been incorporated for more than 1 year, one of the following may also be required: Certificate of Status, copy of the most recent income tax assessment, liquor license or business number for the most recent GST/HST remittance

Partnership:

  • Signatures plus 2 pieces of ID for all partners
  • Partnership agreement
  • Trade name registration or master business license

How to choose the best business chequing account for you

Before selecting a business chequing account, it’s important to ask yourself what your business’ needs are. Maybe you only do a small number of transactions per month; if this is the case, then a very basic account will suffice. Then again, you could also be conducting daily transactions, both in-person and electronically; if you find yourself in this boat, a business chequing account with unlimited transactions is probably what you want to look into.

One Final Note : If your business has excess cash that it doesn’t require for day-to-day needs, also look into business savings accounts. Unlike business chequing accounts, business savings accounts do pay some interest, so it’s a way to make your money grow while it sits in the bank.